Marks: 87 Question No: 1 ( Marks: 1 ) – Please choose one We can say that the business is in profit, when:

► Assets exceed Expenditure

► Assets exceed Liabilities

► Income exceeds Expenditure

► Income exceeds Liabilities

Question No: 2 ( Marks: 1 ) – Please choose one

Term “Credit” means_______ by the business.

► Receiving of benefits

► It has no effect on business

► Providing of benefits correct

► It depends upon items

Question No: 3 ( Marks: 1 ) – Please choose one

According to the double entry system of accounting, an account that obtains benefit is:

► Debit

► Credit

► Income

► No need to show as accounting record

Question No: 4 ( Marks: 1 ) – Please choose one

When a Liability is reduced or decreased, it is recorded on the:

► Right or debit side of the account

► Left or debit side of the account

► Left or credit side of the account

► Right or credit side of the account

Question No: 5 ( Marks: 1 ) – Please choose one

When Capital is increased by an amount, it is recorded on the:

► Left or credit side of the account

► Right or debit side of the account

► Left or debit side of the account

► Right or credit side of the account

Question No: 6 ( Marks: 1 ) – Please choose one

Bank book is part of:

► Voucher

► General Journal

► General Ledger

► Trial Balance

Question No: 7 ( Marks: 1 ) – Please choose one

What type of expenses are paid out of Gross Profit?

► Selling Expenses

► General Expenses

► Financial Expenses

► All of the given options

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following shows summary of a company’s financial position at a specific date?

► Profit & Loss Account

► Cash Flow Statement

► Balance Sheet

► Income & Expenditure Account

Question No: 9 ( Marks: 1 ) – Please choose one

Which of the following is NOT an example of intangible assets?

► Franchise rights

► Goodwill

► Patents

► Land

Question No: 10 ( Marks: 1 ) – Please choose one Which of the following is an example of business liability?

► Land

► Building

► Cash

► Capital

Question No: 11 ( Marks: 1 ) – Please choose one

The unfavorable balance of Profit and Loss account should be:

► Added in liabilities

► Subtracted from current assets

► Subtracted from liabilities

► Subtracted from capital

Question No: 12 ( Marks: 1 ) – Please choose one

Which of the following account will be credited, if business bought goods on credit from Mr. Ali?

► Purchases account

► Mr. Ali account

► Cash account

► Sales account

Question No: 13 ( Marks: 1 ) – Please choose one

Interest on loan paid by business is an example of :

► Deferred expense

► Revenue expense

► Capital expense

► None of the given options

Question No: 14 ( Marks: 1 ) – Please choose one

The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as:

► Appreciation

► Depreciation

► Fluctuation

► None of the given options

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following is NOT a function of bank reconciliation statement?

► To reconcile the difference between the cash book and the bank statement

► To check for errors in balance sheet

► To update omitted entries into the cash book

► To update omitted entries into the bank statement

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following entry will be recorded when the Bad Debts are recovered?

► Cash account (Dr.) & Bad Debts recovered account (Cr.)

► Accounts Receivable account (Dr.) & Bad Debts recovered account

(Cr.)

► Bad debts recovered account (Dr.) and Profit & Loss account (Cr.)

► Provision for doubtful debts account (Dr.) & Cash account (Cr.)

Question No: 17 ( Marks: 1 ) – Please choose one

Which of the following subsidiary book(s) is (are) maintained for debtors control account?

► Sales Day Book

► Sales Return

► Debtors Ledger

► All of the given options

Question No: 18 ( Marks: 1 ) – Please choose one

Sales are calculated by adding:

► Cash sales and cash received from debtors

► Credit sales and cash received from debtors

► Cash sales and credit sales

► Cash ales and credit purchases

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following item will be shown on debit side of debtors account?

► Discount received

► Return inwards

► Discount allowed

► Credit sales

Question No: 20 ( Marks: 1 ) – Please choose one

Goods purchased from “Mr. A” for Rs. 2,000 passed through the sales book. The rectification of error will result in:

► Increase of gross profit

► Decrease of gross profit

► Remains constant and no effect on net profit

► There is no relation between goods purchased and gross profit

Question No: 21 ( Marks: 1 ) – Please choose one

Goods of Rs.1,000 purchased from Mr. “A” were recorded in sales book, the rectification of this error will:

► Increase the gross profit

► Reduce the gross profit

► Have no effect on gross Profit

► None of the given options

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when a typewriter is sold that has been used in the office?

► Cash Account

► Sales Account

► Purchase Account

► Office Equipment Account

Question No: 23 ( Marks: 1 ) – Please choose one

When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 25 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account

► Rs. 3,600

► Rs. 4,000 correct

► Rs. 1,600

► Rs. 2, 400

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is an example of operating expense?

► Purchasing operating equipment

► Purchasing cleaning services

► Purchasing an investment in another company

► Purchasing a computer for the accounting office

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following would NOT be considered as a component of ‘cost’ of stock?

► Salaries of selling staff

► Transportation inward costs

► Import duties

► Purchase price

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following will be debited, if cash is drawn by Proprietor?

► Proprietor’s drawings

► Proprietor’s cash

► Proprietor’s capital

► Proprietor’s income

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is TRUE about the treatment of insurance paid in advance Rs. 13,000?

► It will be treated as an other income in Profit & Loss Account

► It will be treated as a current asset in Balance Sheet

► It will be treated as a current liability in Balance Sheet

► It will be treated as an accrued expense in Balance Sheet

Question No: 30 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only correct

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 31 ( Marks: 1 ) – Please choose one

Fixed Assets (WDV) + Working Capital =?

► Total assets employed

► Total liabilities

► Total assets

► Current assets

Question No: 32 ( Marks: 1 ) – Please choose one

Current accounts of the partners should be opened when the capitals are:

► Fixed

► Fluctuating

► Floating

► Normal

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following is (are) type(s) of Public Limited Companies?

► Listed company

► Non listed company

► Private limited company

► Both Listed Company and non listed company

Question No: 34 ( Marks: 1 ) – Please choose one

The charter of a company which defines the limitations and powers of the company is called:

► The memorandum of association correct

► Articles of association

► Statutory report

► Certificate of commencement

Question No: 35 ( Marks: 1 ) – Please choose one

Merchandise on hand at either the beginning or end of the reporting period is called__________.

► Raw material

► Cost of good sold

► Work in process

► Inventory

Question No: 36 ( Marks: 1 ) – Please choose one

The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable and an ending balance of Rs. 15,000. Credit Sales of Rs. 200,000 were made during the year. Using this information, compute cash collected from customers.

► Rs. 205,000

► Rs. 215,000

► Rs. 195,000

► Rs. 200,000

Question No: 37 ( Marks: 1 ) – Please choose one

Rs.

Gross profit

50,000

Operating profit

42,000

Sales

250, 000

What is the amount of operating expenses

?

► Rs. 8,000

► Rs. 92,000

► Rs. 62,500

► Rs. 300,000

Question No: 38 ( Marks: 1 ) – Please choose one

Particulars

Rs.

Debentures

1, 50, 000

Equity Capital

2, 00,000

General Reserve

90, 000

Accumulated profit

60,000

What is debt equity ratio

?

► 15: 20 (or 3:4)

► 15:24 (or 5: 8)

► 15:29

► 15:35 (or 3: 7)

Question No: 39 ( Marks: 1 ) – Please choose one

A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to:

► Decrease assets and liabilities.

► Increase assets and stockholders’ equity.

► Decrease assets and stockholders’ equity.

► Increase liabilities and decrease stockholders’ equity.

Question No: 40 ( Marks: 1 )

– Please choose one

Particulars

Rs.

Direct materials costs

80,000

Direct labor costs

50,000

Manufacturing overhead costs

60,000

Prime cost

?

► Rs.130, 000

► Rs.110, 000

► Rs.140, 000

► Rs.190, 000

Question No: 41 ( Marks: 1 ) – Please choose one

What would be the value of conversion cost, if the cost of material consumed during the month is Rs. 5,000, labor cost incurred is Rs. 2,000 and the factory over head cost is Rs. 1,000?

► Rs. 3,000

► Rs. 5,000

► Rs. 7,000

► Rs. 8,000

Question No: 42 ( Marks: 1 ) – Please choose one

The amount owed by debtors at the end of a month appears on the_________ side of the control account.

► Left side or debit

► Left side or credit

► Right side or debit

► Right side or credit correct

Question No: 43 ( Marks: 1 ) – Please choose one

Which of the following is correct for an account has debit balance?

► The amount of the debits exceeds the amount of the credits

► There are more entries on the debit side than on the credit side

► Its normal balance is debit without regard to the amounts on the debit

side

► The last entry of the accounting period was posted on the debit side

Question No: 44 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal share in profit or loss. The agreement provides that Mr. A will receive Rs.10,000 and Mr. B will receive Rs.8,000 as salary allowance. The net income for the year is Rs.85,000. What will be the total share of Mr. A?

► Rs.52,500

► Rs.42,500

► Rs.43,500

► Rs.50,500

Question No: 45 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the profit share of Mr. B?

► Rs.42,350

► Rs.44,150

► Rs.41,600

► Rs.40,850

Profit = 85000

Add markup on drawings = 1500 + 1800 = 3300 Total net profit = 88300

Profit share of B = 88300/2 = 44150

Question No: 46 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal investment and equal share in profit or loss. Markup on capital of Mr. A is Rs.2,500 and markup on drawings of Mr. B is Rs.2,800. The net income for the year is Rs.95,000. What will be the amount of distributable profit?

► Rs.89,700

► Rs.94,700

► Rs.95,300

► Rs.100,300

Question No: 47 ( Marks: 1 ) – Please choose one

Which of the following can be distributed among the share holders?

► Capital reserve

► General reserve

► Revaluation reserve

► All of the given options

Question No: 48 ( Marks: 1 ) – Please choose one

Which of the following capital is taken up by the general public?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 49 ( Marks: 1 ) – Please choose one

All of the following have an effect on ‘operating activities’ while preparing the statement of cash flows except:

► Provision for doubtful debts

► Gain or loss on currency exchange rate

► Depreciation charged on fixed asset

► Amount received for disposal of a fixed asset

Question No: 50 ( Marks: 1 ) – Please choose one

Primary purpose of the cash flows statement is to provide the information about:

► Errors or discrepancies between cash book and income statement

► Receipt and payment of cash in the period

► Non cash adjustment that effect the income statement

► Cash paid to the customers and creditors of the business

Question No: 51 ( Marks: 1 ) – Please choose one

Which of the following financial statement is helpful for the investors and creditors to assess the cash and non cash aspects of operating, investing and financing transactions on an entity’s financial position?

► Balance Sheet

► Income Statement

► Statement of cash flows

► Statement of changes in equity

Question No: 52 ( Marks: 1 ) – Please choose one

According to the statement of cash flows following are the examples of investing activities except:

► Sales of machinery

► Capital invested by the owners

► Purchase of building for the business use

► Cash received from the disposal of equipment

Question No: 53 ( Marks: 1 ) – Please choose one

Which of the following items of balance sheet are useful in evaluating a company’s liquidity?

► Current assets and other assets

► Current liabilities and current assets correct

► Current liabilities and plant and equipment

► Non current liabilities and other assets

Question No: 54 ( Marks: 1 ) – Please choose one

Which of the following is measured by debt ratio?

► Short-term liquidity

► Creditors’ long term risk correct

► Short-term risk of the company

► All of the given options

Question No: 55 ( Marks: 3 )

If the capitals of the partners are fixed, Pass Journal Entries for the following:

v Drawings made by partner

v Excess drawn amount is returned by partner

v Profit distribution among partner

Partner’s Current A/c Dr.

Cash/Bank A/c Cr.

Cash/Bank Dr.

Partner’s Current A/c Cr.

Profit & Loss A/c Dr.

Partner’s Current A/c Cr.

Question No: 56 ( Marks: 5 )

ABC Company purchased goods of Rs.150,000 on credit from which goods of Rs.20,000 were defected and returned. Company received 2% discount at the time of payment from the supplier.

Required:

What will be the amount of discount received by the company?

Also show the journal entries

Purchases A/c

150,000

Creditor A/c

150,000

Goods are being purchased

Creditor A/c

20,000

Purchases A/c

20,000

Goods returned to supplier

Creditor A/c

130,000

Discount Received A/c

2600

Cash/Bank A/c

127400

Payment is being made to creditor and 2% discount is received.

Question No: 57 ( Marks: 5 )

Why are receipts and payment of interest classified as operating activities?

Question No: 58 ( Marks: 10 )

On 01-01-2007, the provision for doubtful debts a/c stood at Rs. 12,000 (credit balance). In 2007, the bad debts are amounted to Rs. 10,000. The debtors on 31-12-2007 are amounted to Rs. 3, 20,000 and a provision for doubtful debt to be maintained @ 5%.

Required:

Show Journal entries and also show how the items will appear in Profit and Loss account and Balance sheet. (Show complete working where it is necessary)

Question No: 59 ( Marks: 10 )

The accounting staff of ABC, Inc., has assembled the following information for the year ended December 31, 2007:

Cash and cash equivalents, Jan. 1

Rs.35,800

Cash and cash equivalents, Dec. 31

74,800

Cash paid to acquire plant assets

21,000

Proceeds from short-term borrowings

10,000

Loan made to borrowers

5,000

Collection on loans (excluding interest)

4,000

Interest and dividends received

27,000

Cash received from customers

795,000

Proceeds from sale of plant assets

9,000

Dividends paid

55,000

Cash paid to suppliers and employees

635,000

Interest paid

19,000

Income taxes paid

71,000

Using this information, prepare a statement of cash flows. Include a proper heading for the financial statement, and classify the given information into the categories of operating, investing and financing activities.

Paper No:35

Solved by Chanda Rehman & Abr

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 3)

Question No: 1 ( Marks: 1 ) – Please choose one

Which of the following is correct according to the double entry system of book-keeping?

► Debit = Credit

► Debit > Credit

► Debit < Credit

► All of the given options

Question No: 2 ( Marks: 1 ) – Please choose one

What is the nature of an expense account?

► Debit

► Credit

► Revenue

► None of the given options

Question No: 3 ( Marks: 1 ) – Please choose one

Which of the following are the components of General Ledger?

1) Title of account

2) Amount of transaction

3) Date of transaction

► (1) & (2) only

► (2) & (3) only

► (1) & (3) only

► (1), (2) & (3)

Question No: 4 ( Marks: 1 ) – Please choose one

Which of the following organizations prepare Income & Expenditure account?

► Public libraries

► NGOs

► Labor unions

► All of the given options

Question No: 5 ( Marks: 1 ) – Please choose one

Which of the following item will appear on the Balance Sheet as current assets?

► Prepaid expenses

► Accrued expenses

► Furniture and Equipment ►Unearned revenue

Question No: 6 ( Marks: 1 ) – Please choose one

Accounts Receivable & Inventory are the examples of:

► Liquid assets

► Current assets

► Fixed assets

► Capital assets

Question No: 7 ( Marks: 1 ) – Please choose one

Which of the following statement is NOT TRUE about Current liabilities?

► These are due within one year

► These are short-term loans

► These are consist of all debts, payable after 12 months

► In working capital, these are deducted from current assets

Question No: 8 ( Marks: 1 ) – Please choose one

If the cost of sales is Rs. 60,000, sales are Rs. 95,000 and operating expenses are Rs. 20,000 during the year, what would be the value of Gross Profit?

► Rs. 15,000

► Rs. 35,000

► Rs. 55,000

► Rs. 60,000

Question No: 9 ( Marks: 1 ) – Please choose one

Which of the following is an alternate term which can be used for “Capital”?

► Liability ►Owner’s net worth

► Working capital

► Asset

Question No: 10 ( Marks: 1 ) – Please choose one

In the cost of goods sold statement, Cost of direct material consumed + Direct labor=?

► Conversion cost

► Prime cost

► Total factory cost

► Cost of goods manufactured

Question No: 11 ( Marks: 1 ) – Please choose one

The total of all costs incurred to convert raw material into finished goods is known as:

► Prime cost

► Conversion cost

► Sunk cost

► Opportunity cost

Question No: 12 ( Marks: 1 ) – Please choose one

In cost of goods sold statement the ‘total factory cost’ is equal to:

► Cost of material consumed + Labor cost

► Cost of material consumed + Conversion cost

► Cost of material consumed + Total factory cost

► Cost of material consumed + Factory overhead

Question No: 13 ( Marks: 1 ) – Please choose one

All the costs incurred on the incomplete assets up to the balance sheet date must be transferred to:

► Capital account

► Capital work in progress account

► Relevant asset account

► Owner’s equity account

Question No: 14 ( Marks: 1 ) – Please choose one

Which one of the following is NOT true about revenue expenditure?

► These are the running expenses of the business

► They improve the financial position of the business

► They reduce the profit of the concern

► They do not appear in the balance sheet

Question No: 15 ( Marks: 1 ) – Please choose one

Which one of the following is NOT true for Profit & Loss Account?

► It shows whether a business has made a profit or loss over a financial

year

► It shows the financial performance of a business for the period

► It shows revenues and expenses for the period

► It is used to calculate surplus/deficit for a particular period

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following best describes unpresented cheques?

► Cheques received on behalf of the business by the bank

► Cheques drawn but yet to be recorded in the bank records

► Cheques issued by the bank not recorded in business records

► Cheques received but yet to be recorded in the bank records

Question No: 17 ( Marks: 1 ) – Please choose one

Which of the following option is TRUE about the characteristic(s) of Bad Debt?

► It is a definite loss to the business

► It is not shown in Balance Sheet

► No provision is necessary for it

► All of the given options

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following is (are) included in Creditors Control Account?

► Discount received from supplier

► Credit purchases

► Bills payable

► All of the given options

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following is shown on credit side of creditors control account?

► Bills Receivable

► Return inwards

► Credit purchases

► Discount allowed

Question No: 20 ( Marks: 1 ) – Please choose one

Which one of the following is CORRECT about subsidiary ledger?

► It is a special Ledger

► It is a supporting ledger

► It provides detailed information about individual accounts

► All of the given options

Question No: 21 ( Marks: 1 ) – Please choose one

Amount by which the purchaser (buyer) receives a reduction in price from the seller is known as:

► Expense

► Discount Allowed

► Discount Received

► Liability

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following entry will be passed to record discount received in control account?

► Discount Received (Dr) and Creditors Control A/c (Cr)

► Discount Received (Dr) and Creditors A/c (Cr)

► Creditors Control A/c (Dr) and Discount Received (Cr)

► Creditors A/c (Dr) and Discount Received (Cr)

Question No: 23 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of sales to Rahim of Rs. 500 were omitted to record in books of accounts?

Sales account

► Rahim’s account

► Cash account

► Both sales and Rahim’s Account

Question No: 24 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account

► Rs. 3,600

► Rs. 4,000

► Rs. 1,600

► Rs. 2, 400

Question No: 25 ( Marks: 1 ) – Please choose one

The figure of cash received from debtors can be located either from cash book or:

► Debtor’s Control Account

► Balance Sheet

► Profit & Loss Account

► Bills Payable Account

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following would NOT be considered as a component of ‘cost’ of stock?

► Salaries of selling staff

► Transportation inward costs

► Import duties

► Purchase price

Question No: 27 ( Marks: 1 ) – Please choose one

Capital account of sole proprietors is affected by which of the following items?

Profit & Loss account

Drawings account

Balances of capital account

► a,b

► b,c

► a,c

► a,b,c

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the partnership form of business?

► Partners must have to share their profits in equal proportion

► Partners are personally liable for the liabilities of the business

► Partnerships must make their accounts available to the general public

► Partnership agreement in writing is called Partnership deed

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following represents the relationship between persons who have agreed to share the profit of business carried on by all or any of them acting for all?

► Sole-ownership

► Private limited company

► Public limited company

► Partnership

Question No: 30 ( Marks: 1 ) – Please choose one

The Joint Stock Company is formed under the Companies Ordinance:

► 1984

► I884

► 1948

► 1965

Question No: 31 ( Marks: 1 ) – Please choose one

In which of the following, the Interest paid on debenture will be shown?

► Profit and loss account

► Profit and loss appropriation account

► Balance sheet asset side under the heading of “current assets”

► Trading Account

Question No: 32 ( Marks: 1 ) – Please choose one

The primary purpose of preparing a cash flow statement for an entity is to provide information about:

► Its financial position at the end of an accounting period

► Its cash receipts and cash payments during an accounting period

► Its financial position at the start of an accounting period

► None of the given options

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following business publishes the Financial Statements?

► Sole-Proprietorship

► Partnership

► Trust

► Public Limited Company

Question No: 34 ( Marks: 1 ) – Please choose one

If the Capitals of partners are fixed then, at the end of financial year a partner’s drawings are transferred to the:

► Credit side of the partner’s capital account

► Credit side of the partner’s current account

► Debit side of partnership bank account

► Debit side of the partner’s current account

Question No: 35 ( Marks: 1 ) – Please choose one

Wages outstanding given in the trial balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 36 ( Marks: 1 ) – Please choose one

In balance sheet fixed assets are shown at:

► Residual value

► Market value

► Fair value

► Written down value (WDV)

Question No: 37 ( Marks: 1 ) – Please choose one

Suppose a firm has 200 debtors, and each of them owes exactly Rs. 150 at the start of June. What is the total amount owed by all debtors?

► Rs. 2,000

► Rs. 3,000

► Rs. 30,000

► Rs. 150,000

Question No: 38 ( Marks: 1 ) – Please choose one What will be obtained from the Purchases Returns Book?

► Discount received

► Returns outward

► Credit purchases

► Discount allowed

Question No: 39 ( Marks: 1 ) – Please choose one

In the heading of financial statement, ___________ is not required?

► Title of financial statement

► Name of the person who prepares financial statement

► Period for which financial statement is prepared

► Name of business entity

Question No: 40 ( Marks: 1 ) – Please choose one

Which of the following justifies when profit is earned?

► Assets exceed Expenditure

► Income exceeds Expenditure

► Cash Inflow exceeds Cash Outflow

► Income exceeds Liabilities

Question No: 41 ( Marks: 1 ) – Please choose one

A and B entered in partnership in capital ratio of 2:3. They earned a profit of Rs.6,600 during the year. What will be the share of profit of Mr. A?

► Rs.1,320

► Rs.2,640

► Rs.3,960

► Rs.6,600

Question No: 42 ( Marks: 1 ) – Please choose one

In a partnership of Mr. X and Mr. Y, the share of profit of Mr. X is Rs.3,840 and the share of profit of Mr. Y is Rs. 5,760. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 2:1

Question No: 43 ( Marks: 1 ) – Please choose one

Which of the following is decreased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 44 ( Marks: 1 ) – Please choose one

Accumulated depreciation is a ____________ account?

► Fixed asset

► Current asset

► Contra asset

► Liability

Question No: 45 ( Marks: 1 ) – Please choose one

Adjusting entries are recorded in which of the following?

► Voucher

► General journal

► Ledger

► Trial balance

Question No: 46 ( Marks: 1 ) – Please choose one

Expired costs in an accounting period should be reported on ____________

statement for that time period.

► Cash in flow

► Cash out flow

► Income

► Expense

Question No: 47 ( Marks: 1 ) – Please choose one

Interest expenses of Epler Corporation shows a debit balance of Rs.200 in its unadjusted trial balance and Rs.250 in adjusted trial balance. Which of the following account will be debited in adjusting entry?

► Interest expense

► Interest payable

► Prepaid interest

► Interest paid

Question No: 48 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal investment and equal share in profit or loss. Markup on capital of Mr. A is Rs.2,500 and markup on drawings of Mr. B is Rs.2,800. The net income for the year is Rs.95,000. What will be the amount of distributable profit?

► Rs.89,700

► Rs.94,700

► Rs.95,300

► Rs.100,300

Question No: 49 ( Marks: 1 ) – Please choose one

Which of the following can be distributed among the share holders?

► Capital reserve

► General reserve

► Revaluation reserve

► All of the given options

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following capital is offered to the general public?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 51 ( Marks: 1 ) – Please choose one

Which of the following value of the share is authorized by the memorandum of association?

► Par value

► Face value

► Nominal value

► All of the given options

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following financial statement is helpful for the investors and creditors to assess the cash and non cash aspects of operating, investing and financing transactions on an entity’s financial position?

► Balance Sheet

► Income Statement

► Statement of cash flows

► Statement of changes in equity

Question No: 53 ( Marks: 1 ) – Please choose one

The financial statement that captures both the current operating result and the associated changes in the balance sheet is:

► Statement of retained earnings

► Statement of financial position

► Statement of cash flows

► Statement of changes in equity

Question No: 54 ( Marks: 1 ) – Please choose one

In statement of cash flows, interest payment made on loan from bank is related to:

► Investing activity

► Financing activity

► Operating activity

► Net changes in working capital

Question No: 55 ( Marks: 3 )

Mr. Hassan is a partner in a partnership firm. His capital on July 1, 2001 was Rs. 400,000. He invested further capital of Rs. 150,000 on March 01, 2002.

Markup rate is @6%p.a. The financial year of such a business is from 1st July to 30th June.

Required: You are required to calculate his markup on Capital at the end of 30th June 2002.

40% of salaries will be charge to office and balance to Selling expenses

Question No: 57 ( Marks: 5 )

X and Y were partners in a business sharing profits in the ratio of 3:1. Their capital were Rs.30,000 and Rs.10,000 respectively. They earned a net profit of Rs. 160,000. Mr. Y was entitled to a salary of Rs.200 p.m. Prepare Profit Distribution Account of X & Y Partnership.

X AND Y ARE SHARED WITH the ratio 3:1

X capital = 30000

Y capital = 10000

Net profit = 160,000

Mr. Y salary is = 200 p.m entitled

Total investment = X + Y capital = 30000 +10000 = 40000

X profit distribution = 30,000/40000 x 160000 = 120,000

Y profit distrubtion = 10,000/40000 x 160000 x 40000 = 40000

Question No: 58 ( Marks: 10 )

Mention the effects of following on financial statements.

Markup on debentures Markupdebture – Dr. while Debenture Cr

Creation of reserves

Payments of dividend

Carriage inwards

Current Assets are less than Current Liabilities

Question No: 59 ( Marks: 10 )

The following is the trial balance of Sikander’s Photo Studio, Inc., dated December 31, 2007. The net income for the period isRs.36,000. You are required to prepare Balance Sheet as on December 31, 2007.

Sikander’s Photo Studio, Inc. Trial balance

December 31, 2007

Cash

Rs.171,100

Accounts receivable

9,400

Prepaid studio rent

3,000

Unexpired insurance

7,200

Supplies

500

Equipment

18,000

Accumulated depreciation: equipment

Rs.7,200

Notes payable

10,000

Accounts payable

3,200

Salaries payable

4,000

Income tax payable

6,000

Unearned revenue

8,800

Capital stock

100,000

Retained earnings

34,000

Revenue earned

165,000

Salary expense

85,000

Supply expense

3,900

Rent expense

12,000

Insurance expense

1,900

Advertising expense

500

Depreciation expense: equipment

1,800

Interest expense

900

Income taxes expense

23,000

338,200

338,200

Paper No:36

Solved by Chanda Rehman & Abr

Fall 2009

MGT101- Financial Accounting (Session – 2) Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Which of the following is/are the END product of accounting cycle?

► Financial Statements

► General Journal

► General Ledger

► Voucher

Question No: 2 ( Marks: 1 ) – Please choose one

An asset on the balance sheet which is expected to be sold or used within one year is known as:

► Tangible asset

► Current asset

► Fixed asset

► Long term asset

Question No: 3 ( Marks: 1 ) – Please choose one

Accounts Receivable & Inventory are the examples of:

► Liquid assets

► Current assets

► Fixed assets

► Capital assets

Question No: 4 ( Marks: 1 ) – Please choose one

Identify the business transaction for given entry below.

Vehicle Account XXX

(Dr.)

Bank Account

XXX (Cr.)

► Paid for vehicle through cheque

► Paid for vehicle through cash

► Purchased vehicle on credit

► None of the given options

Question No: 5 ( Marks: 1 ) – Please choose one

Which of the following account will be credited, if the goods are sold on credit to Mr. Mahmood?

► Cash account

► Mr. Mahood account

► Sales account

► Purchases account

Question No: 6 ( Marks: 1 ) – Please choose one

If salaries expense is Rs. 2,500, purchases are Rs. 16,000 and rent (office building) is Rs. 300 during the year, what would be the total of “general

& administrative expenses”?

► Rs. 300

► Rs. 2,500

► Rs. 2,800

► Rs.18, 800

Question No: 7 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the positive working capital of a company?

► It shows sound position of a company

► It shows that company has sufficient current assets to meet current liabilities

► It shows that current assets are greater than current liabilities

► All of the given options

Question No: 8 ( Marks: 1 ) – Please choose one

Cost of Goods Sold = ?

► Beginning inventory + Purchases – Work in Process

► Beginning inventory + Purchases – Sales

► Beginning inventory + Purchases – Ending inventory

► Ending inventory + Purchases – Beginning Inventory

Question No: 9 ( Marks: 1 ) – Please choose one

Under the straight line method of depreciation:

► Amount of depreciation increases every year

► Amount of depreciation remains constant for every year

► Amount of depreciation decreases every year

► None of the given options

Question No: 10 ( Marks: 1 )

– Please choose one

Consider the following inventory record:

Date

Item

Quantity

Cost/Unit

Total

2007Jan. 2

Opening

100

Rs.18.00

Rs.1,800

inventory

Mar. 4

Purchase

400

19.00

7,600

May 8

Purchase

800

20.00

16,000

Nov. 3

Purchase

500

21.00

10,500

Four hundred units are unsold, Use the FIFO method of inventory costing and determine the value assigned to the 400 units on hand at the end of the period.

► Rs.7, 500

► Rs.7, 978

► Rs.8, 000

► Rs.8, 400

Question No: 11 ( Marks: 1 ) – Please choose one

While adjusting the cash balance of cash book, which of the following is NOT taken into account.

► Mistakes in the cash book

► Mistakes in the pass book

► Interest credited in the pass book but not entered in cash book

► Interest debited in the pass book but not entered in cash book

Question No: 12

( Marks: 1 ) – Please choose one

Consider the following data:

Particulars

Rs.

Assets

?

Owner’s equity

1,50,000

Liabilities

1,00,000

► Rs. 49,000

► Rs. 55,000

► Rs. 50,000

► Rs. 2, 50,000 Assets = Liabilities + Owner’s Equity

Question No: 13 ( Marks: 1 ) – Please choose one

In accounting accumulated depreciation is:

► Treated as a reserve

► Treated as a contra asset

► Treated as a surplus

► Treated as an expense

Question No: 14 ( Marks: 1 ) – Please choose one

When the Bank Statement balance is more than the Cash Book balance, it is because of:

► Unpresented cheques

► Unrecorded bank charges

► Uncredited cheques

► None of the given options

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following is an item of a debtors control account?

► Cash sale

► Credit sales

► Credit purchase

► Cash purchases

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following is shown on credit side of creditors control account?

► Bills Receivable

► Return inwards

► Credit purchases

► Discount allowed

Question No: 17 ( Marks: 1 ) – Please choose one

A sum of Rs. 200 written off as bad debt now received credited to the account of debtor would:

► Increase the net profit by Rs.200

► Decrease the profit by Rs.200

► Remains constant and no effect on net profit

► There is no relation between debtor and profit

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of an amount Rs.200 received from Mr.”P” wrongly credited to Mr.”Q’s” account?

► Only Cash Account

► Only P’s account

► Only Q’s account

► Both of Mr. P’s & Mr.Q’s Account

Question No: 19 ( Marks: 1 ) – Please choose one

When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

(Then there are errors in which an entry is recorded in the wrong class of account. For example a purchase of fixed asset, say, a vehicle is recorded in an expense account. These errors are called ERRORS OF PRINCIPLE.)

Question No: 20 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

1,600

Provision for doubtful debts

2,000

(old)

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,600

► Rs. 2,000

► Rs. 2,600

Question No: 21 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be deducted from Sundry Debtors in Balance Sheet.

Particulars

Rs.

Bad debts (from trial balance)

1,600

Provision for doubtful debts

2,000

(old)

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,000

► Rs. 2,000

► Rs. 2,600

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following is NOT an item of cost of goods sold statement?

The Balance Sheet item that represents the resources invested by the owner is known as:

► Accounts Receivable

► Cash

► Note Payable

► Owner’s Equity

Question No: 28 ( Marks: 1 ) – Please choose one

Which account is increased with a debit and decreased with a credit?

► Cash

► Accounts Payable

► Contributed Capital

► Retained Earnings

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is/are TRUE about the sole trader form of business?

► Sole traders do not need to consult accountants

► Sole traders must register the name of their business with the Registrar of Companies

► All of the given options

► A sole trader is liable to pay income tax on his/her earnings

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following account is affected from the Drawings of cash in sole-proprietorship business?

► Capital account

► Shareholder account

► Liability account

► Expense account

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following is CORRECT if depreciation is given in trial balance?

► All of the given options are correct

► It means depreciation has already been deducted from concerned asset account

► It will be shown as an expense in income statement only

► It will not be deducted from concerned asset in Balance Sheet

Question No: 32 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the Accounts receivable?

► Accounts receivable arises when a company buys goods or services from another party on credit

► Accounts receivable is a miscellaneous category that may include loans to employees

► Accounts receivable are more formal than notes receivable

► Accounts receivable are often called trade receivables

Question No: 33 ( Marks: 1 ) – Please choose one

The Joint Stock Company is formed under the Companies Ordinance:

► 1984

► I884

► 1948

► 1965

Question No: 34 ( Marks: 1 ) – Please choose one

The amount received; in excess of the face value of the shares is transferred to which of the following?

► Share capital account

► Right share

► Share premium account

► Share holder account

Question No: 35 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

► Share premium account

► Share holder account

► Debtors control account

► Creditor control account

Question No: 36 ( Marks: 1 ) – Please choose one

The statement of changes in equity basically shows the movement of:

► share capital during the year

► Capital reserves during the year

► Revenue Reserves during the year

► All of the given options

Question No: 37 ( Marks: 1 ) – Please choose one

Rs.

Gross profit

50,000

Operating profit

42,000

Sales

250, 000

What is the amount of operating expenses

?

► Rs. 8,000

► Rs. 92,000

► Rs. 62,500

► Rs. 300,000

Question No: 38 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share

ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.

► Rs. 98,000

► Rs. 1, 47,000

► Rs. 2, 45,000

► Rs. 3, 43,000

Question No: 39 ( Marks: 1 ) – Please choose one

Mr.” A” sold goods for Rs. 300,000 to Mr. “B”, Rs. 300,000 will be treated as _____________ for business of Mr. “A”.

► Revenue

► Net profit

► Gross profit

► Operating profit

Question No: 40 ( Marks: 1 ) – Please choose one

What would be the value of conversion cost, if the cost of material consumed during the month is Rs. 5,000, labor cost incurred is Rs. 2,000 and the factory over head cost is Rs. 1,000?

► Rs. 3,000

► Rs. 8,000

► Rs. 7,000

► Rs. 5,000

Question No: 41 ( Marks: 1 ) – Please choose one

Mr. A provided the following information from his books of accounts at the end of the month.

Particulars

Rs.

Cash

100

Accounts Receivable

500

Accounts

Payable

200

Bank

1,000

Loans

Based on the information provided, what are Mr. A’s total liabilities?

► Rs.200

► Rs. 900

► Rs. 1,200

► Rs. 1,700

Question No: 42 ( Marks: 1 ) – Please choose one

When we close bad debt account, which of the following account is debited?

► Profit and loss account

► Bad debt account

► Debtor account

► Creditor account

Question No: 43 ( Marks: 1 ) – Please choose one

Mr. Ali’s bank book shows a debit balance of Rs. 36,000. He deposited a cheque of Rs.15,000 but not yet collected by the bank. What will be the balance of bank statement?

► Rs. 21,000

► Rs. 51,000

► Rs. 36,000

► Rs. 15,000

Question No: 44 ( Marks: 1 ) – Please choose one

Suppose a firm has 100 debtors, and each of them owes exactly Rs.150 at the start of June. During June each debtor has paid-off exactly Rs.100 on their account, either by cash or by cheque. What should be the revised total debtors figure?

► Rs. 5,000

► Rs. 9,850

► Rs. 25,000

► Rs. 14,900

Question No: 45 ( Marks: 1 ) – Please choose one

We usually allow the customer to deduct a certain amount from the invoice value for prompt payment. In doing so we are granting a:

► Commission

► Allowance

► Discount

► Rebate

Question No: 46 ( Marks: 1 ) – Please choose one

The valuation of closing stock is at:

► Cost price

► Market price

► Cost or market price, whichever is lower

► Cost or market price, whichever is higher

Question No: 47 ( Marks: 1 ) – Please choose one

Adjusting costs are reported as:

► Revenues

► Expenses

► Assets

► Net Income

Question No: 48 ( Marks: 1 ) – Please choose one

Which of the following is also affected when an adjusting entry is passed to accrue an incurred expense?

► Total assets

► Total liabilities

► Current assets

► Total income

Question No: 49 ( Marks: 1 ) – Please choose one

Which of the following is known as an asset account?

► Gains

► Prepaid insurance

► Unearned revenue

► Accounts payable

Question No: 50 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal share in profit or loss. The agreement provides that Mr. A will receive Rs.10,000 and Mr. B will receive Rs.8,000 as salary allowance. The net income for the year is Rs.85,000. What will be the total share of Mr. B?

► Rs.52,500

► Rs.42,500

► Rs.41,500

► Rs.50,500

Question No: 51 ( Marks: 1 ) – Please choose one

For which of the following share premium can not be utilized?

► To write off preliminary expenses

► To meet the expenses of issue of shares

► To issue bonus shares

► None of the given options

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following capital is offered to the general public?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 53 ( Marks: 1 ) – Please choose one

Which of the following is known as the charter of the company?

► Prospectus

► Articles of association

► Memorandum of association

► None of the given options

Question No: 54 ( Marks: 1 ) – Please choose one

Statement of cash flows helps the stakeholders to assess:

► Ability to pay cash dividends in the future

► All of the given options

► The ability to generate future cash flows

► The liquidity of the business

Question No: 55 ( Marks: 3 )

How bad debts & provision for doubtful debts (new and old) are treated in profit and loss account.

Question No: 56 ( Marks: 5 )

You are required to pass rectifying entries of the following errors:

Received cash Rs. 500 from Mr. “B” entered as Rs. 300 in the cash book.

A cash sale of Rs. 600 has completely omitted to be recorded in the books.

Goods worth Rs. 200 were returned to Mr. Kamran but no entry was passed in the books.

Question No: 57 ( Marks: 5 )

The face value of the share of ABC public limited company is Rs.10. the share is sold at Rs.15. total shares traded in the market are 50,000. What will be the amount of share premium received and discuss for what it will be utilized?

Question No: 58 ( Marks: 10 )

On 31st December, 2006, a merchant has to receive Rs. 50,000 from sundry debtors and creates provision of 5 percent on this amount for doubtful debts. Actual bad debts during the year 2007 were Rs.1, 400. The debtors on 31st December, 2007, are Rs. 40,000 on which he again creates provision of 5 % for doubtful debts. During 2008 actual bad debts are Rs. 600 and the debtors at the end of 2008 totalled Rs. 25,000, on which a reserve a reserve of 5 % for doubtful debts is required to be maintained.

Required:Prepare provision for doubtful debts account with the help of

given data.

Question No: 59 ( Marks: 10 )

The following Trial balance is taken out from the books of Rahman & Sons as on 31st December, 2008.

Dr.

Cr.

Rs.

Rs.

Sales

204,000

Capital

120,000

Bank overdraft

103,560

Sundry Creditors

120,000

Opening Stock

60,400

Purchases

231,600

Sundry Debtors

109,660

Returns Inwards

3,640

General Expenses

6,980

Plant

22,620

Wages & Salaries

16,740

Building

50,000

Cash in Hand

680

Cash at bank

8,720

Drawings

16,960

Motive Power

2,300

Dock &clearing

Charges

1,300

Coal, Gas, Water

1,700

Salaries

9,820

Interest on O/D

4,440

Rent rates Taxes

1,400

Discount Allowed

2,000

Interest received

3,400

550,960

550,960

Requirement:

Prepare The Trading and Profit & Loss account of the business for the year ended. Closing Stock is valued at Rs.40, 000.

Paper No:37

Solved by Chanda Rehman & Abr & nomi chawal

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 1)

Ref No: 1195799 Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Shares for which amount is paid by public are called ________ shares.

► Paid up

► Authorized

► Bonus shares

► All are correct options

Question No: 2 ( Marks: 1 ) – Please choose one

Term “Credit” means_______ by the business.

► Receiving of benefits

► It has no effect on business

► Providing of benefits

► It depends upon items

Question No: 3 ( Marks: 1 ) – Please choose one

Which of the following is used to record financial transactions in chronological (day-to-day) order?

► Voucher

► General Journal

► General Ledger

► Trial balance

Question No: 4 ( Marks: 1 ) – Please choose one

Which of the following is CORRECT about the flow of recording a transaction?

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

6,000

Current year’s provision (new)

1,500

► Rs. (5,100)

► Rs. 5,100

► Rs. (900)

► Rs. 900

Question No: 19 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 5 % of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account.

► Rs. 3,600

► Rs. 2,000

► Rs. 1,600

► Rs. 400

Question No: 20 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Bad Debts (Given in trial balance)

500

Old provisions (Given in trial balance)

800

Sundry Debtors (Given in trial balance)

44,500

Provision for doubtful debts @ 5%

Which amount of new provision will be deducted from Sundry Debtors

?

► Rs. 2,225

► Rs. 2,525

► Rs. 1,925

► Rs. 3,025

Question No: 21 ( Marks: 1 ) – Please choose one

It is supposed that on 31-12-2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 5 % of the sundry debtors are doubtful. It is also suppose that during the year 2008 actual bad debts were Rs. 1,600. What entry will pass to create provision for doubtful debts?

Which of the following entry is passed to record discount allowed in control account?

► Discount Allowed (Dr) and Debtors Control A/c (Cr)

► Discount Allowed (Dr) and Debtors A/c (Cr)

► Debtors Control A/c (Dr) and Discount Allowed (Cr)

► Debtors A/c (Dr) and Discount Allowed (Cr)

Question No: 25 ( Marks: 1 ) – Please choose one

Transaction that has been completely forgotten to enter is called:

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when a typewriter is sold that has been used in the office?

► Cash Account

► Sales Account

► Purchase Account

► Office Equipment Account

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 28 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be deducted from Sundry debtors?

Which financial statement show what a business owes at a particular point in time?

► A cash flow statement

► The bank statement for the business

► A balance sheet

► A statement of retained earnings

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following account is affected from the Drawings of cash in sole-proprietorship business?

► Capital account

► Shareholder account

► Liability account

► Expense account

Question No: 32 ( Marks: 1 ) – Please choose one

Capital account of sole proprietors is affected by which of the following items?

Profit & Loss account

Drawings account

Balances of capital account

► a,b

► b,c

► a,c

► a,b,c

Question No: 33 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 34 ( Marks: 1 ) – Please choose one

Fixed Asset (WDV) + ___________ = Total assets Employed

► Working capital

► Total liabilities

► Total assets

► Current assets

Question No: 35 ( Marks: 1 ) – Please choose one

A, B, C are partners. Their profit sharing ratio is equal. Capital balance on July 1st of Partner A — Rs. 40,000 Partner B — Rs. 30,000 and Partner C— Rs. 20,000.Their private property of Partner A is Rs.15,000, Partner B is Rs. 7,000 and Partner C is Rs. 1,500. What is the level of their liabilities under the partnership firm?

► Partner A—Rs. 40,000, Partner B—- Rs. 30,000, Partner C – 20,000

► Partner A—Rs. 40,000, Partner B—- Rs. 30,000, Partner C – 21,500

► Partner A—Rs. 40,000, Partner B—- Rs. 37,000, Partner C – 20,000

► Partner A—Rs. 55,000, Partner B—- Rs. 37,000, Partner C – 21,500

Question No: 36 ( Marks: 1 ) – Please choose one

Share premium account is used for what?

► Write off Preliminary Expenses of the company.

► Write off the balance amount, in issuing shares on discount.

► Issue fully paid Bonus Shares.

► All of the given options

Question No: 37 ( Marks: 1 ) – Please choose one

Which of the following is the most important document of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Annual Report

Question No: 38 ( Marks: 1 ) – Please choose one

Which of the following documents contains rules and regulations for internal management of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Statutory Declaration

Question No: 39 ( Marks: 1 ) – Please choose one

A firm may earn profit during an accounting period but have less money in the bank at the end of the period then it had at the beginning. Which of the followings, on its own, could explain this?

► Not paying invoices received from creditors

► The sale of fixed assets during the period

► An increase in trade debtors over the course of the period

► An increase in the depreciation charge relative to the previous accounting

period

Question No: 40 ( Marks: 1 ) – Please choose one

Which of the following statement in NOT TRUE about the limited company form of business?

► The limited company form of business allows ownership of the business to be spread amongst many people

► Shareholders can appoint professionals

► Shareholders are personally liable for all the liabilities incurred by the business

► Regular filing of information about the affairs of the company is a legal requirement

Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following ratio tells about “How a company would repays its loans”

► Mark up cover ratio

► Acid test ratio

► Current ratio

► Debt Equity ratio

Question No: 42 ( Marks: 1 ) – Please choose one

If Cost of asset=Rs. 100,000, Residual Value (RV) = Rs. 20,000 and Life = 3 years, what is the depreciation rate under reducing balance method?

► 10%

► 22%

► 42%

► 52%

Question No: 43 ( Marks: 1 ) – Please choose one

Mr.” A” sold goods for Rs. 300,000 to Mr. “B”, Rs. 300,000 will be treated as

_____________ for business of Mr. “A”.

► Revenue

► Net profit

► Gross profit

► Operating profit

Question No: 44 ( Marks: 1 ) – Please choose one

An uncollectible account receivable is also termed as:

► Asset

► Uncollectible asset

► Uncollectible accounts expense

► None of the given options

Question No: 45 ( Marks: 1 ) – Please choose one

Payment is made of a company’s purchases on credit, which of the following is correct:

► Debit stock account and credit creditors account

► Debit creditors account and credit cash account

► Debit cash account and credit creditors account

► Debit stock account and credit cash account

Question No: 46 ( Marks: 1 ) – Please choose one

ABC company makes payment of Rs.50,000 to Mr. Ali Zafar, who is a debtor, is wrongly recorded in the account of Zafar Ali. The error is classified as:

► Error of commission

► Error of omission

► Error of original entry

► Error of principle

Question No: 47 ( Marks: 1 ) – Please choose one

Deferred revenues will become revenue when they are:

► Realized

► Earned

► Incurred

► Paid

Question No: 48 ( Marks: 1 ) – Please choose one

The weekly or biweekly compensation received by hourly-paid employees is called:

► Salary

► Wages

► Income

► Profit

Question No: 49 ( Marks: 1 ) – Please choose one

Interest expenses of Epler Corporation shows a debit balance of Rs.200 in its unadjusted trial balance and Rs.250 in adjusted trial balance. Which of the following account will be credited in adjusting entry?

► Interest expense

► Interest payable

► Prepaid interest

► Interest paid

Question No: 50 ( Marks: 1 ) – Please choose one

Insurance premiums paid in advance but not yet expired are reported in which of the following account?

► Insurance payable

► Prepaid insurance

► Advance payment account

► Insurance expense

Question No: 51 ( Marks: 1 ) – Please choose one

Dillon Company sold marketable securities Costing Rs.60,000 for Rs.72,000 cash. In the company’s income statement and statement of cash flows, respectively, this will appear as:

► A Rs.72,000 gain and a Rs.6,000 cash receipt

► A Rs.12,000 gain and a Rs.72,000 cash receipt

► A Rs.12,000 gain and a Rs.60,000 cash receipt

► A Rs.72,000 sale and a Rs.72,000 cash receipt

Question No: 52 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal share in profit or loss. The agreement provides that Mr. A will receive Rs.10,000 and Mr. B will receive Rs.8,000 as salary allowance. The net income for the year is Rs.85,000. What will be the total share of Mr. B?

► Rs.52,500

► Rs.42,500

► Rs.41,500

► Rs.50,500

Question No: 53 ( Marks: 1 ) – Please choose one

Which of the following is quoted company?

► Private Limited Company

► Public Limited Company

► Listed company

► Non Listed Company

Question No: 54 ( Marks: 1 ) – Please choose one

Which of the following is one of the major factors affecting the market value of a company’s shares?

► Current ratio

► Earning per share

► Return on investment

► Return on asset

Question No: 55 ( Marks: 3 )

You are required to pass rectifying entries of the following errors:

Sales of old furniture has been credited to sales account for Rs. 200.

Salaries paid Rs. 20,000 were wrongly debited to rent a/c.

Question No: 56 ( Marks: 5 )

3.

Discuss share premium with an example.

4. If dividend is announced in percentage by the directors of the company how it will be calculated.

Question No: 57 ( Marks: 5 )

ABC Company purchased goods of Rs.150,000 on credit from which goods of Rs.20,000 were defected and returned. Company received 2% discount at the time of payment from the supplier.

Required:

5.

What will be the amount

of discount received by the company?

6.

Also show the journal

entries

Question No: 58

( Marks: 10 )

The following Trial balance is taken out from the books of Rahman & Sons as on 31st December, 2008.

Dr.

Cr.

Rs.

Rs.

Sales

204,000

Capital

120,000

Bank overdraft

103,560

Sundry Creditors

120,000

Opening Stock

60,400

Purchases

231,600

Sundry Debtors

109,660

Returns Inwards

3,640

General Expenses

6,980

Plant

22,620

Wages & Salaries

16,740

Building

50,000

Cash in Hand

680

Cash at bank

8,720

Drawings

16,960

Motive Power

2,300

Dock &clearing

Charges

1,300

Coal, Gas, Water

1,700

Salaries

9,820

Interest on O/D

4,440

Rent rates Taxes

1,400

Discount Allowed

2,000

Interest received

3,400

550,960

550,960

Requirement:

Prepare The Trading and Profit & Loss account of the business for the year ended. Closing Stock is valued at Rs.40, 000.

Question No: 59 ( Marks: 10 )

Adil and Bilal make up their accounts annually to 31st December and have been in partnership for some years. Interest is charged on drawings at the rate of 10% per annum and is allowed on capitals also at 10% per annum. Bilal receives salary Rs. 4,000 per annum. The balance of profits or losses is to be shared: Adil 2/3, Bilal 1/3.

At 1st January, 2007, the following balances appeared in the firm’s books:

Capital account: Adil

Rs. 10,000

Bilal

Rs. 6,000

Current Account: Adil

Rs. 5,000 (Cr)

Bilal

Rs. 3,000 (Cr)

The net profit for that year was amounted to Rs. 15,000. At that date the balances on partners’ drawings accounts were: Adil Rs. 6,000 and Bilal Rs. 5,000. It is assumed that no capital introduced during the year

Required:

(1) The profit & Loss Appropriation account of the partnership for the year ended 31st December, 2007.

(2) Show Partners’ current accounts and capital accounts in Balance sheet of Adil and Bilal as on 31st December 2007

Paper No:38

Solved by Chanda Rehman & ABr & Anjum

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 2)

Question No: 1 ( Marks: 1 ) – Please choose one

Shares for which amount is paid by public are called ________ shares.

► Paid up

► Authorized

► Bonus shares

► All are correct options

Question No: 2 ( Marks: 1 ) – Please choose one

Which of the following account/s will be affected under the rule of accrual accounting, when furniture is purchased on cash?

► Only Cash Account

► Only Furniture Account

► Cash & Furniture Account

► Only Purchases Account

Question No: 3 ( Marks: 1 ) – Please choose one

A book, in which receipts and payments are recorded, is known as:

► Pass Book

► Cash Book

► Purchase Book

► Sales Book

Question No: 4 ( Marks: 1 ) – Please choose one

Which of the following shows summary of a company’s financial position at a specific date?

► Profit & Loss Account

► Cash Flow Statement

► Balance Sheet

► Income & Expenditure Account

Question No: 5 ( Marks: 1 ) – Please choose one

Which of the following is NOT an example of intangible assets?

► Franchise rights

► Goodwill

► Patents

► Land

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following account will be credited in the books of ABC Co. Ltd., if furniture is purchased on cash?

► Furniture account

► Cash account

► Business account

► Bank account

Question No: 7 ( Marks: 1 ) – Please choose one

If the working capital and the current assets of company XYZ are Rs. 5,000 and Rs.15,000 respectively, calculate the current liabilities.

► Rs. 5,000

► Rs. 10,000

► Rs. 15,000

► Rs. 20,000

Question No: 8 ( Marks: 1 ) – Please choose one

Cost of Goods Sold = ?

► Beginning inventory + Purchases – Work in Process

► Beginning inventory + Purchases – Sales

► Beginning inventory + Purchases – Ending inventory

► Ending inventory + Purchases – Beginning Inventory

Question No: 9 ( Marks: 1 ) – Please choose one

The total of all costs incurred to convert raw material into finished goods is known as:

► Prime cost

► Conversion cost

► Sunk cost

► Opportunity cost

Question No: 10 ( Marks: 1 ) – Please choose one

In cost of goods sold statement the ‘cost of goods manufactured’ is equal to:

► Total factory cost + Opening work in process + Ending work in process

► Total factory cost + Opening work in process – Ending work in process

► Total factory cost – Opening work in process + Ending work in process

► Ending work in process +Total factory cost – Opening work in process

Question No: 11 ( Marks: 1 ) – Please choose one

Fixed assets are also called:

► Depreciable assets

► Current assets

► Liquid assets

► Floating assets

Question No: 12 ( Marks: 1 ) – Please choose one

Consider the following inventory record:

Date

Item

Quantity

Cost/Unit

Total

2007Jan. 2

Opening inventory

100

Rs.18.00

Rs.1,800

Mar. 4

Purchase

400

19.00

7,600

May 8

Purchase

800

20.00

16,000

Nov. 3

Purchase

500

21.00

10,500

Four hundred units are unsold, Use the FIFO method of inventory costing and determine the value assigned to the 400 units on hand at the end of the period.

► Rs.7, 500

► Rs.7, 978

► Rs.8, 000

► Rs.8, 400

Question No: 13 ( Marks: 1 ) – Please choose one

Increase in an asset is recorded on the:

► Left or credit side of the account

► Right or debit side of the account

► Left or debit side of the account

► Right or credit side of the account

Question No: 14 ( Marks: 1 ) – Please choose one

The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as:

► Appreciation

► Depreciation

► Fluctuation

► None of the given options

Question No: 15 ( Marks: 1 ) – Please choose one

Consider the following data:

Particulars

Rs.

Assets

?

Owner’s equity

1,50,000

Liabilities

1,00,000

► Rs. 49,000

► Rs. 55,000

► Rs. 50,000

► Rs. 2, 50,000

Question No: 16 ( Marks: 1 ) – Please choose one

Consider the following data:

Particulars

Rs.

Assets

8,20,000

Owner’s equity

3,80,000

Liabilities

?

► Rs. 1, 98,000

► Rs. 49,000

► Rs. 55,000

► Rs. 4, 40,000

Question No: 17 ( Marks: 1 ) – Please choose one

A debit balance in the Bank Statement indicates:

► Cash at bank

► Bank overdraft

► Overpayment to creditors

► Cash in hand

Question No: 18 ( Marks: 1 ) – Please choose one

Bank Statement is a record of transactions between the bank and the holder of:

► A foreign currency account

► A current account

► A saving account

► All of the given options

Question No: 19 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be deducted from Sundry Debtors in Balance Sheet.

Particulars

Rs.

Bad debts

(from trial balance)

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

800

► Rs. 400

► Rs. 800

► Rs. 2,000

► Rs. 2,400

Question No: 20 ( Marks: 1 ) – Please choose one

It is supposed that on 31-12-2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 5 % of the sundry debtors are doubtful. It is also suppose that during the year 2008 actual bad debts were Rs. 1,600. What entry will pass to create provision for doubtful debts?

Which of the following account(s) will be affected, while rectifying the error of purchases return of Rs. 200 to “Mr.P” mistakenly entered in sales book?

► P’s account

► Purchases return account

► Sales account

► Purchases returns account and sales account

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of a purchase return of Rs.200 to Mr. “A” entered in sales book instead of purchase return book?

► A’s account only

► Sales account only

► Purchase returns account and sales account

► Purchases account only

Question No: 25 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of an amount Rs.200 received from Mr.”P” wrongly credited to Mr.”Q’s” account?

► Only Cash Account

► Only P’s account

► Only Q’s account

► Both of Mr. P’s & Mr.Q’s Account

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following entry will be recorded, if a cheque deposited is dishonored by bank?

► Bank Account (Dr.) and Debtor’s Account (Cr.)

► Debtor’s Account (Dr.) and Bank Account (Cr.)

► Dishonored Cheque Account (Dr.) and Bank Account (Cr.)

► Creditor’s Account (Dr.) and Bank Account (Cr.)

Question No: 27 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Write off Bad debts (given in adjustments)

2,400

Sundry Debtors (given in trial balance)

33,200

Provision is created on Debtors at 10%

Identify the

Total amount deducted from Sundry debtors.

► Rs. 460

► Rs. 2,400

► Rs. 3,080

► Rs. 5,480

Question No: 28

( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Bad Debts (Given in trial balance)

500

Old provisions (Given in trial balance)

700

Sundry Debtors (Given in trial balance)

44,500

Provision for doubtful debts be increases by 5%

What will be the amount of new provision

?

► Rs. 2,225

► Rs. 2,425

► Rs. 1,925

► Rs. 3,025

Question No: 29

( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Bad Debts (Given in trial balance)

500

Old provisions (Given in trial balance)

700

Sundry Debtors (Given in trial balance)

44,800

If the Provision for doubtful debts has been increased by 5%, which amount of new provision will be shown in Profit & Loss Account?

► Rs. 2,240

► Rs. 2,425

► Rs. 1,925

► Rs. 3,025

Question No: 30 ( Marks: 1 ) – Please choose one

Wages paid to laborers working in the manufacturing department is treated as an expense of:

► Administrative expenses

► Selling expenses

► Marketing expenses

► Cost of goods sold

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following represents the relationship between persons who have agreed to share the profit of business carried on by all or any of them acting for all?

► Sole-ownership

► Private limited company

► Public limited company

► Partnership

Question No: 32 ( Marks: 1 ) – Please choose one

In Income Statement, both beginning inventory and ending inventory appear in the section of:

► Cost of good sold

► Indirect cost

► Selling cost

► Factory over head cost

Question No: 33 ( Marks: 1 ) – Please choose one

If dividend is proposed by directors of the company @ 30% for the year, it will be calculated on:

► Capital Reserve

► Authorized share capital

► Paid up share capital

► Share premium

Question No: 34 ( Marks: 1 ) – Please choose one

A company is said to have been registered when:

► It gets certificate of incorporation from registrar of Companies

► It gets certificate of commencement of business from registrar of Companies

► It actually starts its business

► It filed with the Registrar of Companies articles certain documents, like memorandum and articles of association

Question No: 35 ( Marks: 1 ) – Please choose one

6% Debentures Account Rs. 3, 00,000. What amount of interest on debentures should be shown in profit and loss account?

► Rs. 6,000

► Rs. 3, 00,000

► Rs. 18,000

► Rs. 3, 18,000

Question No: 36 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if provision for Income Tax to be made Rs. 12,000 is given in adjustment?

► It will be deducted in Income Statement only

► It will be treated as current liability in balance sheet only

► It will be treated as current asset in balance sheet only

► Both it will be deducted in income statement and it will be treated as current liability in balance sheet

Question No: 37 ( Marks: 1 ) – Please choose one

When the current Ratio is 2: 5 and the amount of Current Liabilities is Rs. 25,000. What will be the amount of Current Assets?

► Rs. 62,500

► Rs. 12,500

► Rs. 10,000 (25000*2/5 = 10000)

► Cannot be calculated with the help of given data

Question No: 38 ( Marks: 1 ) – Please choose one

Prepaid interest given in the Trial Balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 39 ( Marks: 1 ) – Please choose one

Which one of the following is another name of carrying cost of an asset?

► Book Value

► Residual Value

► Fair Value

► Break up Value

Question No: 40 ( Marks: 1 ) – Please choose one

An overdraft will appear as:

► A debit balance in both the bank statement and the cash book

► A credit balance in the bank statement but as a debit balance in the cash book

► A credit balance in the cash book but as a debit balance in the bank statement

► A credit balance in both the bank statement and the cash book

Question No: 41 ( Marks: 1 ) – Please choose one

Recovery of bad debts is treated as:

► Profit

► Revenue

► Expense

► Asset

Question No: 42 ( Marks: 1 ) – Please choose one

The amount owed by debtors at the end of a month appears on the_________ side of the control account.

► Left side or debit

► Left side or credit

► Right side or debit

► Right side or credit

Question No: 43 ( Marks: 1 ) – Please choose one

The amount owed by debtors at the start of a month appears on the ___________ side of the individual debtors account.

► Left side or credit

► Left side or debit

► Right side or debit

► Right side or credit

Question No: 44 ( Marks: 1 ) – Please choose one

Ahmad Industries want to make payment to its supplier in the form of a pay order. The bank deducted Rs.160 as service charges without its knowledge. The error is known as:

► Error of commission

► Error of omission

► Error of original entry

► Error of principle

Question No: 45 ( Marks: 1 ) – Please choose one

Which of the given statement is CORRECT if both sides of trial balance are equal?

► It is proof that no transaction was completely omitted from the ledger during the posting process

► It is proof that the correct debit or credit balance has been computed for each account

► It is proof that the ledger is in balance

► It is proof that transactions have been correctly analyzed and recorded in the proper accounts

Question No: 46 ( Marks: 1 ) – Please choose one

Which of the following justifies when profit is earned?

► Assets exceed Expenditure

► Income exceeds Expenditure

► Cash Inflow exceeds Cash Outflow

► Income exceeds Liabilities

Question No: 47 ( Marks: 1 ) – Please choose one

In a partnership of Mr. A and Mr. B, the share of profit of Mr. A is Rs.75,375 and the share of profit of Mr. B is Rs. 25,125. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 3:1

Question No: 48 ( Marks: 1 ) – Please choose one

Income tax expense of Eden Corporation shows a debit balance of Rs.7,000 in its unadjusted trial balance and Rs.7,600 in adjusted trial balance. Which of the following account will be credited in adjusting entry?

► Income tax payable

► Prepaid income tax

► Income tax expense

► Income tax paid

Question No: 49 ( Marks: 1 ) – Please choose one

Sanders Construction sold a plant asset that originally cost Rs.80,000 for Rs.52,000 cash. If Sanders correctly reports a Rs.5,000 gain on this sale, the accumulated depreciation on the asset at the date of sale must have been:

► Rs.23,000

► Rs.28,000

► Rs.33,000

► Some other amount

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following is responsible to register the companies?

► State Bank of Pakistan

► Security and Exchange Commission of Pakistan

► Supreme Court

► Stock Exchange

Question No: 51 ( Marks: 1 ) – Please choose one

Which of the following can be utilized to set off any loss on revaluation?

► Capital reserve

► General reserve

► Revaluation reserve

► None of the given options

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following is known as the charter of the company?

► Prospectus

► Articles of association

► Memorandum of association

► None of the given options

Question No: 53 ( Marks: 1 ) – Please choose one

Statement of cash flows helps the stakeholders to assess:

► Ability to pay cash dividends in the future

► All of the given options

► The ability to generate future cash flows

► The liquidity of the business

Question No: 54 ( Marks: 1 ) – Please choose one

Short term investments in marketable securities and treasury bills that will mature within ninety days from the date of acquisition, must be classified as:

► Receivables

► Receipts from Capital

► Current and intangible assets

► Cash equivalents

Question No: 55 ( Marks: 3 )

Give four reasons, why capital might change.

1. The entrance or exit of some (new) partner

2. Withdraw by partner(s)

3. Additional Investment by the partner(s)

4. Profit/Loss

Question No: 56 ( Marks: 5 )

Write down the five advantages of Limited Company.

1. It is a legal entity created by law and hence has its own recognition, good will and brand equity etc.

2. It is a wide form of business and hence a formal approach for various partners/investors to come and work for the same objectives in an organized form.

3. Liability limited to company assets only. Investors/partners do not personally liable for any loss or in state of bankrupty.

4. Being a legal entity, easy to get loans or gather funds from public (for public limited companies only) or financial institutes.

5. Being a legal entity, it can enjoy more opportunities for mega projects and trade/operations opportunities in international markets on its on behalf.

Question No: 57 ( Marks: 5 )

ABC Company purchased goods of Rs.150,000 on credit from which goods of Rs.20,000 were defected and returned. Company received 2% discount at the time of payment from the supplier.

Required:

What will be the amount of discount received by the company?

Also show the journal entries

Solution:

(A)

Discount Received= (150,000-20,000) x (2/100) = 2600

(B)

Particulars

Dr.

Cr.

Entry for Purchase

Goods

150,000

A/P

150,000

Entry for Return

A/P

20,000

Goods

20,000

While making Payment (@ 2% discount = 2600)

A/P

130,000

Discount income

2,600

Cash

127,400

Question No: 58 ( Marks: 10 )

State clearly how you will deal with Bad Debts Account, Provision for Bad DebtsAccount, Profit & Loss account and Balance Sheet in the following case:

The items appearing in the trial balance are bad debts Rs. 300, provision for bad debts Rs. 350 and sundry debtors Rs. 12,000. It is required to increase the provision for bad debts to 5% on sundry debtors.

Question No: 59 ( Marks: 10 )

The unadjusted and adjusted trial balances for Tinker Corporation on December 31, 2007, are shown below:

Tinker Corporation

Trial Balances

December 31, 2007

Unadjusted

Adjusted

Debit

Credit

Debit

Credit

Rs.

Rs.

Rs.

Rs.

Cash

35,200

35,200

Accounts receivable

29,120

29,120

Unexpired insurance

1,200

600

Prepaid rent

5,400

5,400

Office supplies

680

380

Equipment

60,000

60,000

Accumulated depreciation: equipment

49,000

50,000

Accounts payable

900

900

Notes payable

5,000

5,000

Interest payable

200

200

Salaries payable

–

2,100

Income taxes payable

1,570

1,570

Unearned revenue

6,800

3,800

Capital stock

25,000

25,000

Retained earnings

30,000

30,000

Fees earned

91,530

94,530

Advertising expense

1,500

1,500

Insurance expense

6,600

7,200

Rent expense

19,800

19,800

Office supplies expense

1,200

1,500

Repairs expense

4,800

4,800

Depreciation expense: equipment

11,000

12,000

Salaries expense

26,300

28,400

Interest expense

200

200

Income taxes expense

7,000

7,000

210,000

210,000

213,100

213,100

Journalize the five adjusting entries that the company made on December 31, 2007.

Solution:

Date

Particular

Dr.

Cr.

Dec 31

Insurance expense

600

to

Unexpired insurance

600

Dec 31

Office Supplies Expense

300

to

Office Supplies

300

Dec 31

Depreciation Expense-Equip.

1000

to

Accumulated depreciation-Equip.

1000

Dec 31

Salaries Expense

2100

to

Salaries Payable

2100

Dec 31

Unearned revenue

3000

to

Fee Earned

3000

Paper no 39

Solved by Abr,Nomi & Chanda Rehman

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 4)

Ref No: 1195888

Time: 120 min

Marks: 8

Question No: 1 ( Marks: 1 ) – Please choose one

Shares for which amount is paid by public are called ________ shares.

► Paid up

► Authorized

► Bonus shares

► All are correct options

Question No: 2 ( Marks: 1 ) – Please choose one

The area of accounting concerned with reporting financial information to the interested parties is called:

► Cost Accounting

► Financial Accounting

► Management Accounting

► Tax Accounting

Question No: 3 ( Marks: 1 ) – Please choose one

An organization operating with the objective of making profit from the sale of goods or services is called:

► Transaction

► Business

► Society

► Trust

Question No: 4 ( Marks: 1 ) – Please choose one

Which of the following essentials are shown in Bank Book?

(1) Date of transaction

(2) Narration of transaction

(3) Cheque number

► (1) & (2) only

► (2) & (3) only

► (1) & (3) only

► (1), (2) & (3)

Question No: 5 ( Marks: 1 ) – Please choose one

Which of the following summarizes the cash movements during a specified period?

► Trading account

► Profit & Loss account

► Receipts & Payments account

► Balance Sheet

Question No: 6 ( Marks: 1 ) – Please choose one

What type of expenses are paid out of Gross Profit?

► Selling Expenses

► General Expenses

► Financial Expenses

► All of the given options

Question No: 7 ( Marks: 1 ) – Please choose one

Following are the inventories of Manufacturing Concern EXCEPT:

► Raw material

► Work in process

► Finished goods

► Merchandise inventory

Question No: 8 ( Marks: 1 ) – Please choose one

In cost of goods sold statement, the ‘cost of material consumed’ is equal to:

Which of the following is (are) benefit/s of subsidiary ledger accounts to business?

► It tells about customer attitude of payments

► It can be checked against the control account to pick up recording errors

► It tells about the complete history of transactions of business client

► All of the given options

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

► A’s account (Dr.) and B’s account (Cr.)

► B’s account (Dr.) and A’s account (Cr.)

► Sales account (Dr.) and B’s account (cr.)

► B’s account (Dr.) and Sales account (Cr.)

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 23 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account

► Rs. 3,600

► Rs. 4,000

► Rs. 1,600

► Rs. 2, 400

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following is the first phase of the typical operating cycle?

► Sell goods and services to customers

► Purchase goods and services

► Receive cash from customers

► Pay cash to suppliers

Question No: 25 ( Marks: 1 ) – Please choose one

Which one of the following is TRUE about provisions?

► It is necessary to prepare for showing true picture of balance sheet

► It is a reduction from assets

► It is prepared for specific purposes

► All of the given options

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor?

► Fixed assets

► Current liabilities

► Profit sharing ratio

► Long term assets

Question No: 27 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following is (are) NOT example(s) of distributable profit?

► None of the given options

► General reserve

► Accumulated profit and loss (credit balance)

► Revaluation reserves

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is NOT a cash inflow?

► Sale of fixed asset

► Issue of debentures

► Cash from business operation

► Purchase of fixed asset

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following business publishes the Financial Statements?

► Sole-Proprietorship

► Partnership

► Trust

► Public Limited Company

Question No: 31 ( Marks: 1 ) – Please choose one

Particulars

Nominal value of each share

Rs.10

No of shares issued

10,000 shares

Net profit

Rs. 20,000

Divined paid

10%

What is the EPS

?

► Rs. 1.00

► Rs. 2.00

► Rs. 3.00

► Rs. 4.00

Question No: 32 ( Marks: 1 ) – Please choose one

When income exceeds expenses in a specific time period is known as:

► Savings

► Net profit

► Gross profit

► Operating profit

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following transaction have NO affect on stockholders’ equity?

► Purchase of building on credit

► Dividends to stockholders

► Net loss

► Investment in cash by stockholders

Question No: 34 ( Marks: 1 ) – Please choose one

In balance sheet fixed assets are shown at: ► Residual value

► Market value

► Fair value

► Written down value (WDV)

Question No: 35 ( Marks: 1 ) – Please choose one

Firms charge depreciation each year:

► To ensure that there is enough money in the firm to replace the asset

► To spread the cost of the asset over its working life

► To reduce the profit and thus reduce the dividends they can pay to share

holders

► Because the law states they must be reduced

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the following is(are) CORRECT for Doubtful Debt?

► It is shown in balance sheet

► It is a definite loss to the business

► No provision is necessary for it

► All of the given option

Question No: 37 ( Marks: 1 ) – Please choose one

Which of the following is not a cause of difference in balances as per pass book and cash book?

► Error in cash book

► Error in pass book

► Direct deposit

► Un credited cheques

Question No: 38 ( Marks: 1 ) – Please choose one

Stock account is debited and creditors account is credited, which of the following is reflecting the statement?

► Discount received

► Goods returned

► Purchase of goods on credit

► Payment of goods

Question No: 39 ( Marks: 1 ) – Please choose one

A bad debt affects the Balance Sheet because it is a (an):

► Liability

► Asset

► Expense

► Income

Question No: 40 ( Marks: 1 ) – Please choose one

The financial year of Atif Brothers & Co. is closed on June 30, 2009. Total cash sales

are Rs. 150,000, credit sales are Rs. 180,000 and total receipts are Rs. 250,000. Credit receipts will be:

► Rs. 150,000

► Rs. 100,000

► Rs. 220,000

► Rs. 280,000

Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following statement is correct? If a company fails to record estimated bad debts expense,

► Net realizable value is understated

► Expenses are understated

► Revenues are understated

► Receivables are understated

Question No: 42 ( Marks: 1 ) – Please choose one

In the heading of financial statement, ___________ is not required?

► Title of financial statement

► Name of the person who prepares financial statement

► Period for which financial statement is prepared

► Name of business entity

Question No: 43 ( Marks: 1 ) – Please choose one

Sunset tours has Rs.3,500 account receivable from the Del Mar Rotary. On January 20, the Rotary makes a partial payment of Rs.2,100 to Sunset Tours. The journal entry made on January 20 by Sunset Tours to record this transaction includes:

► A debit to the Cash Received account of Rs. 3,500

► A credit to the Accounts Receivable account of Rs.2,100

► A debit to the Cash account of Rs.1,400

► A debit to the Accounts Receivables account of Rs.1,400

Question No: 44 ( Marks: 1 ) – Please choose one

A and B entered in partnership in capital ratio of 2:3. They earned a profit of Rs.6,600 during the year. What will be the share of profit of Mr. B?

► Rs.1,320

► Rs.2,640

► Rs.3,960

► Rs.6,600

Question No: 45 ( Marks: 1 ) – Please choose one

The amount of prepaid insurance that expired in the current accounting period should be reported as _____________.

► Prepaid insurance

► Insurance expense

► Insurance payable

► Insurance paid

Question No: 46 ( Marks: 1 ) – Please choose one

Unexpired costs are reported as: ► Revenues

► Expenses

► Assets

► Income

Question No: 47 ( Marks: 1 ) – Please choose one

Insurance premiums paid in advance but not yet expired are reported in which of the following account?

► Insurance payable

► Prepaid insurance

► Advance payment account

► Insurance expense

Question No: 48 ( Marks: 1 ) – Please choose one

Profits earned by partnerships compensate the owners for which of the following?

► Personal services rendered to the business

► Capital invested in the business

► Assuming the risks of ownership

► All of the given options

Question No: 49 ( Marks: 1 ) – Please choose one

Which of the following can be utilized to issue bonus shares?

► Reserves

► Debentures

► Share premium

► Term finance certificate

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following value of the share is authorized by the memorandum of association?

► Par value

► Face value

► Nominal value

► All of the given options

Question No: 51 ( Marks: 1 ) – Please choose one

All of the following have an effect on ‘operating activities’ while preparing the statement of cash flows except:

► Provision for doubtful debts

► Gain or loss on currency exchange rate

► Depreciation charged on fixed asset

► Amount received for disposal of a fixed asset

Question No: 52 ( Marks: 1 ) – Please choose one

According to the statement of cash flows following are the examples of investing activities except:

► Sales of machinery

► Capital invested by the owners

► Purchase of building for the business use

► Cash received from the disposal of equipment

Question No: 53 ( Marks: 1 ) – Please choose one

The financial statement that captures both the current operating result and the associated changes in the balance sheet is:

► Statement of retained earnings

► Statement of financial position

► Statement of cash flows

► Statement of changes in equity

Question No: 54 ( Marks: 1 ) – Please choose one

What is the reason that some short term creditors prefer quick ratio over current ratio as a measure of short-term liquidity?

► Short operating cycle of the company

► Long operating cycle of the company

► Liquidity is not affected by operating cycle

► It is the creditor’s choice

Question No: 55 ( Marks: 3 )

Differentiate between salaries & wages and wages & salaries? Also mention in which financial statements are treated

Question No: 56 ( Marks: 5 )

What is bank overdraft? Mention an example for this. Why companies have to pay mark up on it. Under which head mark up paid on overdraft is shown in financial statement.

Question No: 57 ( Marks: 5 )

Prepare Bank Reconciliation Statement with the help of given data

Particulars

Rs.

Balance as per Bank statement (Cr)

600

Unpresented cheques

1,440

Uncredited cheques

260

Question No: 58 ( Marks: 10 )

The following is the trial balance of Sikander’s Photo Studio, Inc., dated December 31, 2007. You are required to prepare the Profit and Loss account.

Sikander’s Photo Studio, Inc.

Trial balance

December 31, 2007

Cash

Rs.171,100

Accounts receivable

9,400

Prepaid studio rent

3,000

Unexpired insurance

7,200

Supplies

500

Equipment

18,000

Accumulated depreciation: equipment

Rs.7,200

Notes payable

10,000

Accounts payable

3,200

Salaries payable

4,000

Income tax payable

6,000

Unearned revenue

8,800

Capital stock

100,000

Retained earnings

34,000

Revenue earned

165,000

Salary expense

85,000

Supply expense

3,900

Rent expense

12,000

Insurance expense

1,900

Advertising expense

500

Depreciation expense: equipment

1,800

Interest expense

900

Income taxes expense

23,000

338,200

338,200

Question No: 59 ( Marks: 10 )

Internet Consulting Service, Inc., adjusts its accounts every month. Following is the company’s year end unadjusted trial balance dated December 31, 2007. (Bear in mind that adjusting entries already have been made for the first 11 months of 2007, but not for December.)

Internet Consulting Service, Inc.

Unadjusted Trial balance

December 31, 2007

Cash

Rs. 49,100

Rs.

Consulting fees receivable

23,400

Prepaid office rent

6,300

Prepaid dues and subscriptions

300

Supplies

600

Equipment

36,000

Accumulated depreciation: equipment

10,200

Notes payable

5,000

Income tax payable

12,000

Unearned consulting fees

5,950

Capital stock

30,000

Retained earnings

32,700

Dividends

60,000

Consulting fees earned

257,180

Salary expense

88,820

Telephone expense

2,550

Rent expense

22,000

Income taxes expense

51,000

Dues and subscriptions expense

560

Supplies expense

1,600

Depreciation expense: equipment

6,600

Miscellaneous expenses

4,200

353,030

353,030

Other Data:

The useful life of the equipment has been estimated at five years (60 months) from date of acquisition.

Consulting services valued at Rs.2,850 were rendered during December to clients who had made payment in advance.

Salaries earned by employees but not paid as of December 31 amounted Rs.1,700.

An estimate of supplies on hand was made at December 31; the estimated cost of the unused supplies was Rs.450.

Instructions:

Determine the amounts to be reported in the company’s year end adjusted trial balance for each of the following accounts:

Consulting fees earned

Salaries expense

Depreciation expense: equipment

Supplies expense

Income tax expense

Paper no 40

Solved by Chanda Rehman & ABr

FINALTERM EXAMINATION

Spring 2010

MGT101- Financial Accounting (Session – 2)

Time: 90 min

Marks: 69

Question No: 1 ( Marks: 1 ) – Please choose one

Which of the following is correct according to the double entry system of book-keeping?

► Debit = Credit

► Debit > Credit

► Debit < Credit

► All of the given options

Question No: 2 ( Marks: 1 ) – Please choose one

An Asset that is NOT physical in nature is called _________.

► Intangible Asset

► Liquid Asset

► Current Asset

► Fixed Asset

Question No: 3 ( Marks: 1 ) – Please choose one

Which of the following account balance will be shown on debit side of Trial Balance? (It is assumed that all account balances are shown on normal balance)

► Cash account

► Furniture account

► Vehicle account

► All of the given options

Question No: 4

( Marks: 1 )

– Please choose one

Bank Reconciliation Statement is:

► A memorandum statement

► A ledger account

► A part of cash book

► A part of journal

Question No: 5

( Marks: 1 )

– Please choose one

Particulars

Rs.

Opening written down value of machine

Rs. 2,00,000

Cost of new machine purchased during the year

Rs. 50,000

Depreciation during the year

Rs. 25,000

Closing written down value (WDV) of machines

?

► Rs. 2, 25,000

► Rs. 2, 50,000

► Rs. 2, 75,000

► Rs. 75,000

Question No: 6 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Bad Debts (Given in trial balance)

500

Old provisions (Given in trial balance)

700

Sundry Debtors (Given in trial balance)

44,500

Provision for doubtful debts be increases by 5%

What will be the amount of new provision

?

► Rs. 2,225

► Rs. 2,425

► Rs. 1,925

► Rs. 3,025

Question No: 7 ( Marks: 1 ) – Please choose one

Which of the following is a selling expense?

► Interest on deposits

► Any tax/freight is paid on purchases

► General salaries paid to laborers

► Tax & freight paid on sale PG26

Question No: 8 ( Marks: 1 ) – Please choose one

Which account is increased with a debit and decreased with a credit?

► Cash

► Accounts Payable

► Contributed Capital

► Retained Earnings

Question No: 9 ( Marks: 1 ) – Please choose one

Which of the following journal entry will be recorded, if cash is drawn by a Proprietor?

► Proprietor’s drawings a/c (Dr.) and Cash a/c (Cr.)

► Cash a/c (Dr.) and Proprietor’s drawings a/c (Cr.)

► Proprietor’s Capital (Dr.) and Proprietor’s drawings a/c (Cr.)

► Proprietor’s drawings (Dr.) and Proprietor’s Capital a/c (Cr.)

Question No: 10 ( Marks: 1 ) – Please choose one

When the capitals are fixed, which of the following account will be debited for drawings made by a partner?

► Individual Partner’s Current Account

► Partner’s Cash Account

► Partner’s Bank Account

► Partners Capital Account

Question No: 11 ( Marks: 1 ) – Please choose one

Authorized share capital is also known as:

► Registered capital

► Issued capital

► Paid up capital

► Called up capital

Question No: 12 ( Marks: 1 ) – Please choose one

When goods are acquired from the supplier the gross cost of such goods is recorded in:

► Debtor Account

► Purchases Account

► Factory overhead account

► Sales Account

Question No: 13 ( Marks: 1 ) – Please choose one

Which of the following is NOT a cash inflow?

► Sale of fixed asset

► Issue of debentures

► Cash from business operation

► Purchase of fixed asset

Question No: 14 ( Marks: 1 ) – Please choose one

In cash flow statements, which of the following would appear as an inflow of cash?

► The repayments of a bank loan

► Dividend issue in the current year

► Money received as result of selling fixed assets

► The difference between the valuations of old and new fixed assets

Question No: 15 ( Marks: 1 ) – Please choose one

In cash flow statements, which of the following would appear as a cash outflow?

► The payments for purchases made during the year

► A decrease in trade debtors over the course of an accounting period

► Money received as a result of issuing new shares

► Money received as result of selling fixed assets

Question No: 16 ( Marks: 1 ) – Please choose one

When we close bad debt account, which of the following account is debited?

► Profit and loss account

► Bad debt account

► Debtor account

► Creditor account

Question No: 17 ( Marks: 1 ) – Please choose one

Subsidiary ledgers are maintained for:

► Debtors

► Creditors

► Stock

► All of the given options

Question No: 18 ( Marks: 1 ) – Please choose one

ABC Company received discount on its credit purchases, which of the following will be credited while entering in journal?

► Cash

► Discount received

► Creditors

► Bank

Question No: 19 ( Marks: 1 ) – Please choose one

Mr. Ali’s bank book shows a debit balance of Rs. 36,000. He deposited a cheque of Rs.15,000 but not yet collected by the bank. What will be the balance of bank statement?

► Rs. 21,000

► Rs. 51,000

► Rs. 36,000

► Rs. 15,000

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following indicates cash discount received?

► Discount in paying debt earlier

► Discount in receiving debt earlier

► Discount in purchasing huge goods

► Discount in selling huge goods

Question No: 21 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the profit share of Mr. B?

► Rs.42,350

► Rs.44,150

► Rs.41,600

► Rs.40,850

Question No: 22 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the amount of distributable profit?

► Rs.81,700

► Rs.88,300

► Rs.131,700

► Rs.146,700

Question No: 23 ( Marks: 1 ) – Please choose one

Which of the following value of the share is authorized by the memorandum of association?

► Par value

► Face value

► Nominal value

► All of the given options

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following statement is not true regarding the objective of statement of cash flows?

► It is helpful for decision making by management

► It is used for reporting the net profit of the period

► It can be used for estimations for cash flows in future

► It is used to determine the liquidity of the business

Question No: 25 ( Marks: 1 ) – Please choose one

Statement of cash flows helps the stakeholders to assess:

► Ability to pay cash dividends in the future

► All of the given options

► The ability to generate future cash flows

► The liquidity of the business

Question No: 26 ( Marks: 1 ) – Please choose one

According to the statement of cash flows following are the examples of investing activities except:

► Sales of machinery

► Capital invested by the owners

► Purchase of building for the business use

► Cash received from the disposal of equipment

Question No: 27 ( Marks: 1 ) – Please choose one

The cash book in book-keeping records:

► All cash and credit purchase of goods

► Only cash payments

► All receipts and payments in cash

► All cash and credit sale of goods

Question No: 28 ( Marks: 1 ) – Please choose one

What will be the effect of decrease in closing stock on gross profit?

► Gross profit increased

► Gross profit decreased

► No effect on Gross profit

► Gross profit will become positive

Question No: 29 ( Marks: 1 ) – Please choose one

If:

Direct Material Cost is Rs. 20,000

Direct labour cost is Rs. 10,000

Manufacturing Cost is Rs. 45,000

Then:

What is the amount of Factory Overhead?

► Rs. 15,000

► Rs. 30,000

► Rs. 35,000

► Rs. 25,000

Question No: 30 ( Marks: 1 ) – Please choose one

Which one of the following methods for inventory valuation may overstate the income during the periods of rising prices?

► Specific Identification Method

► FIFO Method

► LIFO Method

► Weighted Average Method

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following is NOT a method of calculating depreciation?

► Straight Line Method

► Written Down Value Method

► Diminishing Balance Method

► Specific Identification Method

Question No: 32 ( Marks: 1 ) – Please choose one

What is the treatment of Depreciation in accounting?

► Written in balance sheet under the head of fixed assets

► Charged to profit and loss account

► Written in balance sheet under the head of current assets

► Written in balance sheet under the head of liabilities

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following is TRUE?

► Gain on revaluation is credited to Revaluation Reserve Account.

► Gain on revaluation is debited to Revaluation Reserve Account.

► Gain on revaluation is credited to Profit & Loss Account.

► Gain on revaluation is debited to Profit & Loss Account.

Question No: 34 ( Marks: 1 ) – Please choose one

The loss on the sale of fixed assets is a:

► Normal loss

► Ordinary loss

► Capital loss

► Revenue loss

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the following is NOT included in Debtors Control Account?

► Cash sale

► Credit sale

► Bills receivable

► Discount allowed

Question No: 37 ( Marks: 1 ) – Please choose one

If cash sale is the missing figure, it can be ascertained by the construction of:

► Creditors Control Accounts

► Debtors Control Accounts

► Cash Account

► None of the given options

Question No: 38 ( Marks: 1 ) – Please choose one

Which of the following is/are the Classification of Current Assets?

► Cash Balance

► Loans and Advances

► Bank Balance

► All of the given options

Question No: 39 ( Marks: 1 ) – Please choose one

Depreciation expense is charged to which of the following head?

► Administrative expenses

► Selling expenses

► Cost of sales

► It depends on the nature of expense

Question No: 40 ( Marks: 1 ) – Please choose one

Inventory is always considered as:

► Current asset

► Current liability

► Long-term asset

► Stockholders’ equity

Question No: 41 ( Marks: 1 ) – Please choose one

If:

Capital at the start Rs. 100,000

Profit during the year Rs. 50,000

Withdrawal during the year Rs. 25,000

What would be the closing balance of capital?

► Rs. 175,000

► Rs. 150,000

► Rs. 125,000

► Rs. 75,000

Question No: 42 ( Marks: 1 ) – Please choose one

Which of the following Legal Documents of a company contain(s) the rules and regulations framed for the internal management of the company?

► Memorandum of Association

► Articles of Association

► Both Memorandum of Association and Articles of Association

► Prospectus

Question No: 43 ( Marks: 1 ) – Please choose one

Which one of the following refers to the allotment of shares to the existing shareholders by capitalizing the reserves into additional capital?

► Reserve funds

► Accumulated profit

► Right issue

► Bonus issue

Question No: 44 ( Marks: 1 ) – Please choose one

When a share having a face value of Rs.100 issued at Rs.90 then which one of the following options is correct under this situation?

► Share issued at premium

► Share issued at discount

► Share issued at nominal value

► Share issued at market value

Question No: 47 ( Marks: 1 ) – Please choose one

Which of the following would be a suitable head for short term advances from customers in Balance Sheet?

► Current asset

► Intangible asset

► Tangible asset

► Current liability

Question No: 48 ( Marks: 1 ) – Please vu zs choose one

If there is a portion of long term loan of Rs. 30,000 payable in the current accounting period. Where it will be shown in financial statement?

► Current liability

► Long term liability

► Current asset

► Owner’s equity

Question No: 49 ( Marks: 3 )

Rent expenses Rs. 20,000

Insurance expenses Rs. 30,000

Bad debts Rs. 35,000

In addition rent payable is Rs. 5,000; calculate the amount of operating expenses to be shown in profit and loss account.

When the Bank Statement balance is more than the Cash Book balance, it is because of:

► Unpresented cheques

► Unrecorded bank charges

► Uncredited cheques

► None of the given options

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following account would be credited, when the bad debts are recovered?

► Allowance for bad debts a/c

► Bad debts recovered a/c

► Doubtful debts a/c

► Cash a/c

Question No: 17 ( Marks: 1 ) – Please choose one

Which of the following is/are the item/s of a Control Account?

► Credit sale only

► Cash sale only

► Credit purchase only

► Both Credit sales and Credit purchase

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following is NOT included in Debtors Control Account?

► Cash sales

► Credit sales

► Bills receivable

► Discount allowed

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following is (are) included in Creditors Control Account?

► Discount received from supplier

► Credit purchases

► Bills payable

► All of the given options

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of Sale to Mr.”A” Rs. 336 was not recorded at all?

► Only sales account

► Only A’s account

► Only cash account

► Both sales account and A’s account

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of an amount Rs.200 received from Mr.”P” wrongly credited to Mr.”Q’s” account?

► Only Cash Account

► Only P’s account

► Only Q’s account

► Both of Mr. P’s & Mr.Q’s Account

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 23 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be deducted from Sundry Debtors in Balance Sheet.

Particulars

Rs.

Bad debts (from trial balance)

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,000

► Rs. 2,000

► Rs. 2,600

Question No: 24 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be deducted from Sundry debtors?

► Rs. 3,600

► Rs. 4,000

► Rs. 1,600

► Rs. 2, 400

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is normally treated as the last expense listed in the income statement of a company?

► Interest expense

► General and administrative expenses

► Salaries and wages expense

► Income tax expense

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following accounts would be increased with a debit?

► Contributed Capital

► Retained Earnings

► Revenues

► Expenses

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following is NOT an operating expense?

► Salaries and wages expense

► Rent expense

► Interest expense

► Depreciation expense

Question No: 29 ( Marks: 1 ) – Please choose one

An asset is considered to be a current asset if:

► It has been bought recently and was bought new and not used

► It can be realized in cash or sold or consumed in the business within one

year

► It is a piece of new machinery that is expected to last for at least ten years

► All of the given options

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following item will be shown on debit side of capital account of sole proprietor?

► Cash

► Drawings

► Debtors

► Profit

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor?

► Fixed assets

► Current liabilities

► Profit sharing ratio

► Long term assets

Question No: 32 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 33 ( Marks: 1 ) – Please choose one

What will the effects on financial statements, if machinery is depreciated @ 10%?

► It will be treated as an expense in income statement only

► It will be subtracted from concerned asset only

► It will be treated as a current asset only

► It will be treated as an expense in income statement and subtracted from concerned assets in Balance Sheet

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the Accounts receivable?

► Accounts receivable arises when a company buys goods or services from another party on credit

► Accounts receivable is a miscellaneous category that may include loans to employees

► Accounts receivable are more formal than notes receivable

► Accounts receivable are often called trade receivables

Question No: 35 ( Marks: 1 ) – Please choose one

Fixed Asset (WDV) + ___________ = Total assets Employed

► Working capital

► Total liabilities

► Total assets

► Current assets

Question No: 36 ( Marks: 1 ) – Please choose one

Identify the selling expenses of manufacturing concern with the help of given data.

Particulars

Rs.

Salesman’s salary

70,000

Commission on sales

28,000

Carriage outward

10,000

Carriage inward

5,000

► Rs. 80,000

► Rs. 60,000

► Rs. 38,000

► Rs. 1, 08,000

Question No: 37 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the partnership form of business?

► Partners must have to share their profits in equal proportion

► Partners are personally liable for the liabilities of the business

► Partnerships must make their accounts available to the general public

► Partnership agreement in writing is called Partnership deed

Question No: 38 ( Marks: 1 ) – Please choose one

By which if the following Act/ Ordinance, a company is allowed to issue shares at a higher price than their face value.

► Companies ordinance 1984

► Contract act 1872

► Sales of Goods act 1930

► None of the given options

Question No: 39 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

► Share premium account

► Share holder account

► Debtors control account

► Creditor control account

Question No: 40 ( Marks: 1 ) – Please choose one

Which of the following document(s) define the relation of company with outside world?

► Prospectus

► Statutory Declaration

► Memorandum of Association

► Articles of Association

Question No: 41 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if provision for Income Tax to be made Rs. 12,000 is given in adjustment?

► It will be deducted in Income Statement only

► It will be treated as current liability in balance sheet only

► It will be treated as current asset in balance sheet only

► Both it will be deducted in income statement and it will be treated as current liability in balance sheet

Question No: 42 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if Rs. 6,000 transfer to general reserve is given in adjustment?

► it will be treated in both profit and loss appropriation account and in the balance sheet

► It will be treated in Income Statement only

► It will be treated as current liability in balance sheet only

► It will be treated in profit and loss appropriation account only

Question No: 43 ( Marks: 1 ) – Please choose one

In cash flow statements, which of the following would appear as a cash outflow?

► The payments for purchases made during the year

► A decrease in trade debtors over the course of an accounting period

► Money received as a result of issuing new shares

► Money received as result of selling fixed assets

Question No: 44 ( Marks: 1 ) – Please choose one

Which of the following is CORRECT?

► A cash inflow means increase total cash only

► A cash inflow means increase in cash equivalent only

► A cash inflow means increase in cash and decrease in cash equivalent

► A cash inflow means increase in both cash and cash equivalent

Question No: 45 ( Marks: 1 ) – Please choose one

When opening stock is Rs. 50,000, closing stock Rs. 60,000 and cost of goods sold Rs. 220,000. What will be stock turnover ratio?

► 2 times ► 3 times

► 4 times

► 5 times

Question No: 46 ( Marks: 1 ) – Please choose one

Rs.

Gross profit

50,000

Operating profit

42,000

Sales

250, 000

What is the amount of operating expenses

?

► Rs. 8,000

► Rs. 92,000

► Rs. 62,500

► Rs. 300,000

Question No: 47 ( Marks: 1 ) – Please choose one

What types of changes (is) are made at the admission of partner in partnership?

► Assets of old business will be revalued

► Liabilities of old business will be revalued

► Good will of business will be revalued

► All of the given options

Question No: 48 ( Marks: 1 ) – Please choose one

In which situation(s) Partnership is dissolved?

► In case of death of partner

► At the admission of new partner

► If any partner resigned from partnership

► All of the given options

Question No: 49 ( Marks: 1 ) – Please choose one

If one partner receives a salary which is credited to him at the end of the year, the share of profit available for distribution will be:

► Increased

► Decreased

► Unchanged

► Changed and become negative

Question No: 51 ( Marks: 5 )

What is the Purpose of Control Accounts?

A business needs to have accounts created for individual creditors and debtors in its general ledger. Creditors are people/entity to whom company owes money and debtors are entities/people who owe money to the business. But when a business grows then the number of creditors and debtors also grows. We know that trial balance can give us the mathematical accuracy of accounts and if there is any difference in trial balance we can know it from the general ledger by actually checking each and every transaction for the year. But it is a very time consuming job to check each and every transaction if the business of the company is huge because it will have many many transaction to check. So in this control accounts are maintained in general one for total creditors and one for total debtors. Debtor’s account is called debtor’s control account and creditor’s account is called creditor’s control account. These accounts will not get hit by individual purchase, purchase returns, payments to creditor in case of creditor’s control account and by sales, sales return, receipts in case of debtor’s control account. Periodically this summarized data will be posted from individual ledgers which will be created for each type of transaction e.g a sales subsidiary ledger, purchase subsidiary ledger etc which will contain actual details of transactions with invoice number and periodically the amounts will be summarized from these subsidiary ledgers and posted to the control accounts at a single time. This way the transactions in general ledger will decrease and will become easy to manage and can be easily checked against creditor’s or debtor’s details in total creditor’s ledger and total debtor’s ledger for accuracy.

Question No: 52 ( Marks: 10 )

What is the effect of given adjustments on Trading & Profit & Loss account and Balance Sheet?

Accrued Expenses or Outstanding Expenses

Prepaid Expenses or Unexpired Expenses

Accrued Revenue or Revenue Receivable

Unearned Revenue or Revenue Received in Advance

Depreciation of Asset

1. Accrued Expenses or Outstanding Expenses

Trading and profit and loss account effect

These expenses will be shown in profit and loss account under administrative expenses and will and be deducted from gross profit. They will be used to calculate net profit

Balance sheet effect

These expenses will be shown as expense payable or accrued expenses in balance sheet as current liabilities and will be shown under current liabilities section of liabilities as they have to be paid by business..

2. Prepaid Expenses or Unexpired Expenses

Trading and profit and loss account effect

These will be deducted from relevant expense account to get the actual expenses for the period and that actual amount of expense will be deducted from gross profit to arrive at net profit. This amount of prepaid expenses will not be included in profit and loss account as an expense itself but its effect will be on current expenses for the period for which profit and loss is being calculated.

Balance sheet effect

These prepaid expenses will be show and current assets in balance sheet and will be shown under the section of current assets in balance sheet.

3. Accrued Revenue or Revenue Receivable

Trading and profit and loss account effect

These will be added to sales in trading account in profit and loss statement and will be treated as a revenue in the calculation of gross profit by subtracting cost of goods sold from net sales. This will affect gross profit in trading account.

Balance sheet effect

In balance sheet this revenue will be shown under current assets as receivables from debtors and will be shown under the section of current assets of the business.

4. Unearned Revenue or Revenue Received in Advance

Trading and profit and loss account effect

This will not be added to the sales as sales is recognized when the actual services have been provided or when goods have been shipped irrespective of whether payment has been received or not. So this will not affect profit and loss account as it is still not recognized as sales/revenue.

Balance sheet effect

This is a liability for the company because the company has to give goods or services to the buyer for the advance payment done by the buyer and will be shown as a liability in the balance sheet under the current liability section of balance sheet. Also the same amount will be shown in the bank or cash as current

asset to offset the liability because the cash or cheque has been received for goods not given or services not rendered yet.

5. Depreciation of Asset

Trading and profit and loss account effect

The depreciation of asset is an operating expense for the business and will affect profit and loss account. It will be added to the administrative expense and will be appear in the administrative expense section of profit and loss account and will be deducted from gross profits to arrive at net profits along with other expenses.

Balance sheet effect

In balance sheet it will appear as deduction from the fixed asset as the fixed assets in balance sheet will be shown at written down value. So this will be added to previous balance of accumulated depreciation and will be deducted from the total cost of the fixed assets and will appear in the assets section under the heading of fixed asset. It might appear in notes as sometimes in balance sheet summarized figure of fixed asset at WDV will be shown. In any case it is deducted from fixed asset in balance sheet and affects the total assets side

Question No: 53 ( Marks: 10 )

Prepare profit & loss Appropriation account with the help of given data and show capital accounts and current account in balance sheet for XY Z & Sons

Particulars

Rs.

Net profit for the year

600,000

Opening balance of Capital

X:400,000

Y: 250,000

Z: 300,000

Drawings during the year

X: 100,000

Y: 150,000

Z: 125,000

Salaries are to be paid

X: 12,000

Y:20,000

Z:15,000

Opening Balance of current account

X: 50,000

Y: 60,000

Z: 45,000

Mark up rate on capital

5%

Mark up rate on drawings

5%

Profit sharing ratio for X:Y:Z

30: 25:45

It is assumed that no capital introduced during the year.

ANSWER

XYZ Sons

Profit and Loss Appropriation account for the period ending —-

Amount

Particulars

Amount Rs

Rs

Net Rrofit for the year

600,000

Less Salaries for partners

Partner X

(12,000)

Partner Y

(20,000)

Partner Z

(15,000)

(47,000)

5 % on 400,000 for partner

Less Interest on Capital(5%)

X

(20,000)

5 % on 250,000 for partner

Y

(12,500)

5 % on 300,000 for partner

Z

(15,000)

(47,500)

Partner X’s drawing

Add : Markup on drawings(5%)

100,000

5,000

Partner Y’s drawing

150,000

7,500

Partner Z’s drawing

125,000

6,250

18,750

Net Profit avaialble for distribution

524,250

Profit distributed to partners

X’s share 30%

(157,275)

Y’s share 25%

(131,063)

Z’s share 45%

(235,913)

(524,250)

Total

0

ANSWER PART 2

CURRENT ACCOUNTS OF PARTNERS

XYZ LTD

Partner’s X Current Account

Account Code —

DEBIT SIDE

CREDIT SIDE

Date

Narration /

Date

Narration /

2002

Vr.#

Particulars

Dr. Rs

2002

Vr.#

Particulars

Cr. Rs

Drawing

100,000

Opening balance

50,000

Markup on drawing

5,000

Salary

12,000

Interest on

capital

20,000

Profit paid

157,275

Balance c/d

134,275

TOTAL

239,275

TOTAL

239,275

XYZ LTD

Partner’s Y Current Account

Account Code —

DEBIT SIDE

CREDIT SIDE

Date

Narration /

Date

Narration /

2002

Vr.#

Particulars

Dr. Rs

2002

Vr.#

Particulars

Cr. Rs

Opening

Drawing

150,000

balance

60,000

Markup on drawing

7,500

Salary

20,000

Interest on

capital

12,500

Profit paid

131,063

Balance c/d

66,063

TOTAL

223,563

TOTAL

223,563

Partner

XYZ LTD

Z Current Account

Account Code —

DEBIT SIDE

CREDIT SIDE

Date

Narration /

Date

Narration /

2002

Vr.#

Particulars

Dr. Rs

2002

Vr.#

Particulars

Cr. Rs

Opening

Drawing

125,000

balance

45,000

Markup on drawing

6,250

Salary

15,000

Interest on

capital

15,000

Profit paid

235,913

Balance c/d

179,663

TOTAL

310,913

TOTAL

310,913

Question No: 54 ( Marks: 10 )

Following is information of Shumile Ltd for the year ended December 31st, 2006

Particular

Rs.

Current Asset

160,850

Current Liability

72,500

Plant & Machinery

171,000

Furniture

30,000

Land

100,000

Accumulated profit & Loss c/f (credit balance ) on 31st

7,250

December,2006

Gross Profit on 31st December,2006

125,000

Issued capital

150,000

General Reserve

12,000

Authorized Capital Rs. 10/each

500,000

Long term investment

200,000

Other information:

Depreciation is charged on all Fixed Assets (except Land) @ 10%.

Prepare Balance Sheet as on 31st December, 2006.

Answer :

Shumile Lts

Balance sheet as on date Dec 31st 2006

Amount

Particulars

Amount Rs

Rs

Assets

Fixed Assets

Fixed Assets at WDV

Note 1

280,900

Current Assets

Cuurent Assets

160,850

Current Liability

Current Liability

72,500

Working Captial

88,350

Net Assets employed

Note 2

369,250

Financed by

Authorized share

capital (50,000 shares

500,000

at Rs 10 each)

Share Holder’s Equity

Issued Capital

150,000

General Reserve

12,000

Accumulated profit ansd loss

7,250

Net Shareholder’s Equity

169,250

Long Term Liability

Long Term Investment

200,000

Total

369,250

NOTES TO BALANCE SHEET

Depreciaito

Note 1

n

Depreciation

Total

Accumulate

Openin

Depreciatio

d

Written

Rat

g

n for the

Depreciatio

Down

Pariculars

Cost of Item

e

Balance

year

n

Value

Land

100,000

0

0

0

0

100,000

Plant and machinery

171,000

0.10

0

17,100

17,100

153,900

Furniture

30,000

0.10

0

3,000

3,000

27,000

TOTAL

20,100

20,100

280,900

Net assets

Note 2

employed

Partiucular

Amount

Working Capital

883,850

Fixed assets

280,900

Net Assets employed =

Working Capital +

Fixed assets

1,164,750

Paper no 42

Solved by Chanda Rehman

FINALTERM EXAMINATION

Fall 2008

MGT101- Financial Accounting (Session – 1)

Question No: 1 ( Marks: 1 ) – Please choose one

Wages outstanding given in the trial balance will be treated as a (an):

► Asset

► Liability Correct

► Revenue

► Deferred expense

Question No: 2 ( Marks: 1 ) – Please choose one

Prepaid interest given in the Trial Balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 3 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.

Economic resources owned by a business and expected to benefit for the future operations are called:

► Expenses

► Assets

► Capital

► Liabilities

Question No: 51 ( Marks: 5 )

With the help of given data prepare Capital account of a sole trader and

calculate closing balance of capital.

Rs.

Balance b/f

550,000

Drawings

50,000

Profit & Loss (debit balance)

45,000

CAPITAL ACCOUNT

DEBIT SIDE

CREDIT SIDE

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

Profit and loss

45000

Balance b/f

550,000

Drawings

50,000

Balance c/f

455,000

TOTAL

550,000

TOTAL

550,000

Question No: 52

( Marks: 10 )

Briefly explain the financial statements prepared by the organization. Why these are important for manufacturing concern?

ANSWER: The financial statements prepared by any organization are as follows:

1. Profit and loss account: It shows the performance of the business in a givenperiod. It shows the profitability of business which shows the success or failure of the business.

2. Balance sheet: Balance sheet shows the position of business at a given point.It shows the resources available by the business and the resources invested by the owner and other loans.

3. Cash flow statements: Cash flow statements show the generation of cash andits usage over a given period.

IMPORTANCE OF FINANCIAL STATEMENTS FOR MANUFACTURING CONCERN: These financial statements are important formanufacturing concern organization as they provide information related to financial affairs of the organization. The profitability and liquidity, the resources available to the company and the generation of cash and its usage over a given period which provides reasonable information to the management to take decisions.

Question No: 53 ( Marks: 10 )

The comparative financial statement data for XYZ Company is given below:

December 31

Assets:

2007

2006

Rs.

Rs.

Cash

4,000

7,000

Accounts receivable

36,000

29,000

Inventory

75,000

61,000

Plant and equipment

210,000

180,000

Accumulated depreciation

(40,000)

(30,000)

Total Assets

285,000

247,000

Liabilities & Stockholder’s equity:

Accounts payable

45,000

39,000

Common stock

90,000

70,000

Retain earnings

150,000

138,000

Total liabilities & Stockholder’s equity

285,000

247,000

For 2007, the company reported net income as follows:

XYZ Company

Income Statement

For the year ended 31st December, 2007

Rs.

Sales

500,000

Less: Cost of goods sold

300,000

Gross margin

200,000

Less Operating expenses

180,000

Net Income

20,000

Required:

Prepare a Statement of Cash Flows if dividend of Rs. 8,000 was declared and paid during the year 2007. There were no sales of plant and equipment during the year.

ANSWER:

Starting balance:

Net income

20,000

Add: adjustment for non cash items

Depreciation

38,000

Operating profit before working capital changes:

58,000

Working capital changes:

Add: cash

3,000

Less: accounts receivable

(7,000)

Add: accounts payable

7,000

Cash generated from operations

61,000

Cash flow from investing activities

Cash flow from financing activities:

Common Stock

20,000

Net decrease in cash

3,000

Net cash flow

78,000

Question No: 54 ( Marks: 10 )

Write a note on legal documents required for the formation of company.

ANSWER:

LEGAL DOCUMENTS REQUIRED FOR FORMATION OF COMPANY:

MEMORENDUM OF ASSOCIATION: It contains the following information

Name of company.

Place of registered office

Objective

Amount of share capital with which company registers.

ARTICLES OF ASSOCIATION: It contains the following information

A document that contains all the policies and other matters necessary to run the business of the company. It is signed by all the members of the company.

Which of the following account(s) will be affected, while rectifying the error of sales to Rahim Rs. 336 posted to his account as Rs. 363?

Sales account Rahim s account Cash account

Both sales and Rahim s Account

Question No: 27 ( Marks: 1 ) – Please choose one

When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:

Error of principle

Error of omission

Error of commission

Error of original entry

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following is the first phase of the typical operating cycle? Receive cash from customers

Pay cash to suppliers

Sell goods and services to customers Purchase goods and services

(In the first phase of the operating cycle a business, unless it is a service business, buys inventory and materials which they will resell to customers.)

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is normally treated as the last expense listed in the income statement of a company?

General and administrative expenses

Salaries and wages expense

Income tax expense

Interest expense

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following would NOT be considered as a component of ‘cost’ of stock?

Salaries of selling staff Transportation inward costs Import duties

Purchase price

Question No: 31 ( Marks: 1 ) – Please choose one

Regardless of how long it takes to produce and sell , inventory is always considered to be a:

current liability long-term asset stockholders’ equity current asset

Question No: 32 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor? Fixed assets

Current liabilities Profit sharing ratio Long term assets

Question No: 33 ( Marks: 1 ) – Please choose one

What will the effects on financial statements, if machinery is depreciated @ 10%? It will be treated as an expense in income statement only

It will be subtracted from concerned asset only It will be treated as a current asset only

It will be treated as an expense in income statement and subtracted from concerned assets in Balance Sheet

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the Accounts receivable? Accounts receivable arises when a company buys goods or services from another party on credit

Accounts receivable is a miscellaneous category that may include loans to employees

Accounts receivable are more formal than notes receivable Accounts receivable are often called trade receivables

Question No: 35 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the partnership form of business?

Partners must have to share their profits in equal proportion Partners are personally liable for the liabilities of the business Partnerships must make their accounts available to the general public Partnership agreement in writing is called Partnership deed

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the following represents the relationship between persons who have agreed to share the profit of business carried on by all or any of them acting for all?

Sole-ownership

Private limited company Public limited company

Partnership

Question No: 37 ( Marks: 1 ) – Please choose one

When the capitals are fixed, which of the following account will be debited for drawings made by a partner?

Individual Partner s Current Account

Partner s Cash Account

Partner s Bank Account

Partners Capital Account

Question No: 38 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

Name of company

Place of registered office of company Objective of the company

All of the given options

Question No: 39 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

Share premium account

Share holder account

Debtors control account

Creditor control account

Question No: 40 ( Marks: 1 ) – Please choose one

A _______________ business is one in which income is generated by the resale of bought Products.

Manufacturing

Merchandising Sole Proprietorship Partnership

Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following documents contains rules and regulations for internal management of the company?

Memorandum of Association Articles of Association Prospectus

Statutory Declaration

Question No: 42 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if provision for Income Tax to be made Rs. 12,000 is given in adjustment?

It will be deducted in Income Statement only

It will be treated as current liability in balance sheet only It will be treated as current asset in balance sheet only

Both it will be deducted in income statement and it will be treated as current liability in balance sheet

Question No: 43 ( Marks: 1 ) – Please choose one

A firm may earn profit during an accounting period but have less money in the bank at the end of the period then it had at the beginning. Which of the followings, on its own, could explain this?

Not paying invoices received from creditors The sale of fixed assets during the period

An increase in trade debtors over the course of the period

An increase in the depreciation charge relative to the previous accounting Period doubted

Question No: 44 ( Marks: 1 ) – Please choose one Which of the given Asset is

Not

included in the calculation acid test ratio? Stock

Cash

Debtors

Bills Receivable

Question No: 45 ( Marks: 1 ) – Please choose one

When the current Ratio is 2: 5 and the amount of Current Liabilities is Rs. 25,000. What will be the amount of Current Assets?

Rs. 62,500

Rs. 12,500

Rs. 10,000 (2 * 25000/5 = 10000)

Cannot be calculated with the help of given data

Question No: 46 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.

Rs. 98,000

Rs. 1, 47,000

Rs. 2, 45,000

Rs. 3, 43,000

Question No: 47 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.

Rs. 98,000

Rs. 1, 47,000

Rs. 2, 45,000

Rs. 3, 43,000

Question No: 48 ( Marks: 1 ) – Please choose one

The net income calculated in the income statement for the accounting period is reported on:

Bank Statement

Statement of retained earnings Statement of cash flows None of the given options

Question No: 49 ( Marks: 1 ) – Please choose one

A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to:

When closing stock is given in trial balance, then it will effect: Trading account only

Balance sheet only Owner’s equity only

Both Trading account and Balance sheet

Question No: 38 ( Marks: 1 ) – Please choose one

Fixed Assets (WDV) + Working Capital =?

Total assets employed

Total liabilities

Total assets

Current assets

Question No: 39 ( Marks: 1 ) – Please choose one

Which of the following statements is

NOT TRUE about the partnership form of business?

A partnership is a business run by two or more persons A partnership business is easy to set up

Each partner is liable under the law for the actions of other partners In the absence of agreement, partners will be paid salaries

Question No: 40 ( Marks: 1 ) – Please choose one Which of the following statement is

TRUE

about the partnership form of business?

Partners must have to share their profits in equal proportion Partners are personally liable for the liabilities of the business Partnerships must make their accounts available to the general public Partnership agreement in writing is called Partnership deed Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following are the owners of a company? Proprietors

Partners Shareholders Managers

Question No: 42 ( Marks: 1 ) – Please choose one

The persons who sign articles and memorandum of the company and contribute in the initial share capital of the company are called:

Subscribers

Shareholders

Managers

Directors

Question No: 43 ( Marks: 1 ) – Please choose one

A _______________ business is one in which income is generated by the resale of bought Products.

Manufacturing

Merchandising Sole Proprietorship Partnership

Question No: 44 ( Marks: 1 ) – Please choose one

In which of the following auditor s remuneration payable is shown?

In balance sheet under the head of current liabilities only In balance sheet under the head of current assets only

In income statement under the administrative expense only

In both balance sheet under the head of current liabilities and income statement under the administrative expense

Question No: 45 ( Marks: 1 ) – Please choose one

Which of the following document(s) define the relation of company with outside world?

Prospectus Statutory Declaration

Memorandum of Association Articles of Association

Question No: 46 ( Marks: 1 ) – Please choose one

Which of the following is the most important document of the company? Memorandum of Association

Articles of Association Prospectus

Annual Report

Question No: 47 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if Rs. 6,000 transfer to general reserve is given in adjustment?

It will be treated in Income Statement only

It will be treated as current liability in balance sheet only

It will be treated in profit and loss appropriation account only

it will be treated in both profit and loss appropriation account and in the balance sheet

Question No: 48 ( Marks: 1 ) – Please choose one

Which of the following ratio tells about How a company would repays its loans Mark up cover ratio

Acid test ratio Current ratio Debt Equity ratio

Question No: 49 ( Marks: 1 ) – Please choose one

If company has distributable profit of Rs. 490,000, Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively. What will be the share of profit for Mr. A in distributable profit?

Rs. 98,000

Rs. 147,000

Rs. 245,000

Rs. 343,000

Question No: 50 ( Marks: 1 ) – Please choose one

A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to:

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.

Rs. 98,000

Rs. 1, 47,000

Rs. 2, 45,000

Rs. 3, 43,000

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following item will be credited in capital account of sole proprietor? Cash

Drawings

Debtors

Profit

Paper no 28

Solved by Chanda Rehman, Nomi chakwal ABr

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 1)

Ref No: 1195859 Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Liabilities of the members of the ________ is only limited to the capital introduce by member/s.

► Partnership

► Company

► Sole proprietorship

► None of the given options

Question No: 2 ( Marks: 1 ) – Please choose one

Term “Credit” means_______ by the business.

► Receiving of benefits

► It has no effect on business

► Providing of benefits

► It depends upon items

Question No: 3 ( Marks: 1 ) – Please choose one

What would be the affect on the components of the accounting equation, if goods are purchased on cash?

► Increase in cash and decrease in equity

► Increase in cash and increase in goods

► Increase in goods and decrease in cash

► Increase in equipment and increase in equity

Question No: 4 ( Marks: 1 ) – Please choose one

When a Liability is reduced or decreased, it is recorded on the:

► Right or debit side of the account

► Left or debit side of the account

► Left or credit side of the account

► Right or credit side of the account

Question No: 5 ( Marks: 1 ) – Please choose one

Accounts Receivable & Inventory are the examples of:

► Liquid assets

► Current assets

► Fixed assets

► Capital assets

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following is NOT an example of Current Asset?

► Bank Overdraft

► Accounts Receivable

► Notes Receivable

► Prepaid Expenses

Question No: 7 ( Marks: 1 ) – Please choose one

If the cost of sales is Rs. 60,000, sales are Rs. 90,000 and operating expenses are Rs. 25,000 during the year. What would be the Net Profit?

► Rs. 5,000

► Rs. 25,000

► Rs. 55,000

► Rs. 60,000

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following statement is NOT true about the Journal voucher?

► Financial data is picked only from Journal vouchers to Journal

► These are used to record all transaction other than cash & bank

► These are used to make corrections or adjustments to previous Receipts

► Format of Journal voucher is different from other vouchers

Question No: 9 ( Marks: 1 ) – Please choose one

Which one of the following is CORRECT about the closing stock?

► It appears in the assets side of a balance sheet

► It decreases the value of cost of goods sold

► It becomes opening stock of next year

► All of the given option

Question No: 10 ( Marks: 1 ) – Please choose one

In the cost of goods sold statement, Cost of direct material consumed + Direct labor=?

► Conversion cost

► Prime cost

► Total factory cost

► Cost of goods manufactured

Question No: 11 ( Marks: 1 ) – Please choose one

Consider the following inventory record:

Cost/Unit

Total

Date

Item

Quantity

Rs.

Rs.

Jan. 2

Beginning inventory

10

10

100

Mar. 4

Purchase

35

11

385

May 8

Purchase

40

12

480

Nov. 3

Purchase

20

13

260

De31

Merchandise available

105

1,225

85 units were sold, Use the FIFO method of inventory costing and determine the cost of goods sold.

► Rs. 1,225

► Rs. 1,015

► Rs. 965

► Rs. 992

Question No: 12 ( Marks: 1 ) – Please choose one

Consider the following:

Beginning inventory

10 units @ Rs. 10 per unit

First purchase

35 units @ Rs. 11 per unit

Second purchase

40 units @ Rs. 12 per unit

Third purchase

20 units @ Rs. 13 per unit

Eighty-five units were sold, what is the value of the ending inventory using the FIFO method of inventory costing?

► Rs.260

► Rs.232

► Rs.284

► Rs.268

Question No: 13 ( Marks: 1 ) – Please choose one

Which one of the following is NOT true about revenue expenditure?

► These are the running expenses of the business

► They improve the financial position of the business

► They reduce the profit of the concern

► They do not appear in the balance sheet

Question No: 14 ( Marks: 1 ) – Please choose one

Bank Reconciliation Statement is:

► A memorandum statement

► A ledger account

► A part of cash book

► A part of journal

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following assets are shown at written down value in balance sheet?

► Current assets

► Liquid assets

► Floating assets

► Fixed assets

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following account balance is shown on credit side of Trial Balance? (It is assumed that all account balances are shown on normal balance)

► Cash account

► Furniture account

► Vehicle account

► Capital account

Question No: 17 ( Marks: 1 ) – Please choose one

In which of the following condition(s) DEBT is regarded as BAD.

► Bankruptcy of the debtor

► Disappearance of debtor’s business

► Failure of repeated attempt to collect the debt

► All of the given options

Question No: 18 ( Marks: 1 ) – Please choose one

If Bad Debts written off are given in adjustment, then which of the following entry for bad debts written off is CORRECT?

► Bad debts a/c (Dr) and Trading a/c (Cr)

► Provision for Bad and Doubtful debts a/c (Dr) and Bad debts a/c(Cr)

► Bad debts a/c (Dr) and debtors a/c (Cr)

► Trading a/c (Dr) and Bad debts a/c (Cr)

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following is NOT based on the concept of double entry book keeping system?

► Subsidiary Ledgers doubted

► Creditors Control Accounts

► Debtors Control Accounts

► All of the given options

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following is (are) benefit/s of subsidiary ledger accounts to business?

► It tells about customer attitude of payments

► It can be checked against the control account to pick up recording errors

► It tells about the complete history of transactions of business client

► All of the given options

Question No: 21 ( Marks: 1 ) – Please choose one

When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 22 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account

► Rs. 3,600

► Rs. 4,000

► Rs. 1,600

► Rs. 2, 400

Question No: 23 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Write off Bad debts (given in adjustments)

2,400

Sundry Debtors (given in trial balance)

33,200

Provision is created on Debtors at 10% Identify the Total amount deducted from Sundry debtors.

► Rs. 460

► Rs. 2,400

► Rs. 3,080

► Rs. 5,480

Question No: 24 ( Marks: 1 ) – Please choose one

The figure of cash received from debtors can be located either from cash book or:

► Debtor’s Control Account

► Balance Sheet

► Profit & Loss Account

► Bills Payable Account

Question No: 25 ( Marks: 1 ) – Please choose one

Which of the following is a selling expense?

► Interest on deposits

► Any tax/freight is paid on purchases

► General salaries paid to laborers

► Tax & freight paid on sale

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following item will be shown on debit side of capital account of sole proprietor?

► Cash

► Drawings

► Debtors

► Profit

Question No: 27 ( Marks: 1 ) – Please choose one

Identify the selling expenses of manufacturing concern with the help of given data.

Particulars

Rs.

Salesman’s salary

70,000

Commission on sales

28,000

Carriage outward

10,000

Carriage inward

5,000

► Rs. 80,000

► Rs. 60,000

► Rs. 38,000

► Rs. 1, 08,000

Question No: 28 ( Marks: 1 ) – Please choose one

The income statement of the Limited company is also known as:

► Manufacturing account

► Profit and Loss account

► Profit and Loss Appropriation account

► Current Account

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is the most important document of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Annual Report

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following is (are) NOT example(s) of distributable profit?

► None of the given options

► General reserve

► Accumulated profit and loss (credit balance)

► Revaluation reserves

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following is a common way to evaluate a company’s performance?

► Compare this year’s performance of the company to a prior year’s performance of the company.

► Compare the company’s performance to the industry’s performance.

► Compare the company’s performance to the performance of a competing company.

► All of the given options

Question No: 32 ( Marks: 1 ) – Please choose one

Current ratio may be increased by:

► Overstating current Assets

► Overstating current Liabilities

► Understating current Assets

► Understating current assets and overstating current liabilities

Question No: 33 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.

► Rs. 98,000

► Rs. 1, 47,000

► Rs. 2, 45,000

► Rs. 3, 43,000

Question No: 34 ( Marks: 1 ) – Please choose one

Mr. B provided the following information at the end of the month:

Particulars

Rs.

Cash

100

Accounts Receivable

500

Accounts Payable

200

Bank Loans

1,000

Based on the information provided, what are the total assets of Mr. B?

► Rs.200

► Rs. 600

► Rs. 800

► Rs. 1,700

Question No: 35 ( Marks: 1 ) – Please choose one

An overdraft will appear as:

► A debit balance in both the bank statement and the cash book

► A credit balance in the bank statement but as a debit balance in the cash book

► A credit balance in the cash book but as a debit balance in the bank statement

► A credit balance in both the bank statement and the cash book

Question No: 36 ( Marks: 1 ) – Please choose one

When we close bad debt account, which of the following account is debited?

► Profit and loss account

► Bad debt account

► Debtor account

► Creditor account

Question No: 37 ( Marks: 1 ) – Please choose one

Payment is made of a company’s purchases on credit, which of the following is correct:

► Debit stock account and credit creditors account

► Debit creditors account and credit cash account

► Debit cash account and credit creditors account

► Debit stock account and credit cash account

Question No: 38 ( Marks: 1 ) – Please choose one

Suppose a firm has 200 debtors, and each of them owes exactly Rs. 150 at the start of June. What is the total amount owed by all debtors?

► Rs. 2,000

► Rs. 3,000

► Rs. 30,000

► Rs. 150,000

Question No: 39 ( Marks: 1 ) – Please choose one

The amount owed by debtors at the end of a month appears on the_________ side of the control account.

► Left side or debit

► Left side or credit

► Right side or debit

► Right side or credit

Question No: 40 ( Marks: 1 ) – Please choose one

We usually allow the customer to deduct a certain amount from the invoice value for prompt payment. In doing so we are granting a:

► Commission

► Allowance

► Discount

► Rebate

Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following is decreased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 42 ( Marks: 1 ) – Please choose one

Which of the following is increased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 43 ( Marks: 1 ) – Please choose one

Accumulated depreciation is a ____________ account?

► Fixed asset

► Current asset

► Contra asset

► Liability

Question No: 44 ( Marks: 1 ) – Please choose one

Prepaid insurance will become an expense as the prepaid amount _________.

► Expires

► Adjust

► Paid

► Regulate

Question No: 45 ( Marks: 1 ) – Please choose one

Adjusting costs are reported as:

► Revenues

► Expenses

► Assets

► Net Income

Question No: 46 ( Marks: 1 ) – Please choose one

Insurance premiums paid in advance but not yet expired are reported in which of the following account?

► Insurance payable

► Prepaid insurance

► Advance payment account

► Insurance expense

Question No: 47 ( Marks: 1 ) – Please choose one

Profit and loss sharing in partnership must be based on which of the following:

► Service to the partnership

► Capital contribution

► Any profit-and-loss-sharing method partners desire

► A stated fraction

Question No: 48 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the profit share of Mr. B?

► Rs.42,350

► Rs.44,150

► Rs.41,600

► Rs.40,850

Net Profit = 85 000

Intrest on Drawings = 1500 + 1800 = 3300

Total Profit of the firm = 85 000 + 3300 = 88 300

Profit of B = 88 300 / 2 = 44150

Question No: 49 ( Marks: 1 ) – Please choose one

Which of the following is quoted company?

► Private Limited Company

► Public Limited Company

► Listed company

► Non Listed Company

Question No: 50 ( Marks: 1 ) – Please choose one

For which of the following share premium can be utilized?

► To write off preliminary expenses

► To meet the expenses of issue of shares

► To issue bonus shares

► All of the given options

Question No: 51 ( Marks: 1 ) – Please choose one

Which of the following can be utilized to meet the expenses of issue of shares?

► Reserves

► Debentures

► Share premium

► Term finance certificate

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following capital is required for the registration of the company?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 53 ( Marks: 1 ) – Please choose one

The financial statement that captures both the current operating result and the associated changes in the balance sheet is:

► Statement of retained earnings

► Statement of financial position

► Statement of cash flows

► Statement of changes in equity

Question No: 54 ( Marks: 1 ) – Please choose one

Which of the following is measured by debt ratio?

► Short-term liquidity

► Creditors’ long term risk

► Short-term risk of the company

► All of the given options

Question No: 55 ( Marks: 3 )

What do you know about the Profit and loss appropriation account in case of partnership?

Profit and loss appropriation account contains the information regarding the amount of profit distributed to the partner’s current account.

Question No: 56 ( Marks: 5 )

Show the following assets at Written Down Value in Balance Sheet with complete working.

Particulars

Rs.

Plant & Machinery

53,000

Buildings

35,000

Tools & Equipment

8,650

Depreciation Rate:

v Plant & Machinery @ 10%

v Buildings @ 5%

v Tools& Equipment @ 15%

Plant &

Buildings

Tools &

Total in

Machinery

Equipment

Rs.

Cost

53,000

35,000

8,650

96,650

Depreciation

(5,300)

(1,750)

(1,297.5)

8,347.5

W.D.V

47,700

33,250

7,352.5

88,302.5

Question No: 57 ( Marks: 5 ) Briefly discuss the followings:

1. Issuance of shares at premium

Issuance of shares for an amount more than its face value is known issuance of shares at premium.

2. Cash flow statement

Cash flow statement is a part of financial statements; it contains the information regarding the cash generated by (used in) operating, investing and financing activities.

3. Debentures

Debentures are issued by the companies to raise finance. Normally, the carry a fixed rate of return.

4. Notes to the accounts

Notes to the accounts are a part of financial statements, which contains the detail about the Company, accounting policies used, critical judgment areas and detail of certain account heads of balance sheet and profit and loss account along with the detail of contingencies and commitments, if any.

Question No: 58 ( Marks: 10 )

What is the effect of given adjustments on Trading & Profit & Loss account and Balance Sheet?

a. Accrued Expenses or Outstanding Expenses

Accrued expenses or outstanding expenses are shown as a current liability in the Balance Sheet second effect goes to the expenses in the Trading & Profit and Loss account .

Double entry:

Expenses a/c

Accrued Expenses a/c

b. Prepaid Expenses or Unexpired Expenses

Prepaid expenses are shown as a current asset in the balance sheet and second effect goes to cash and bank account in the Balance Sheet.

Double entry:

Prepaid expenses a/c

Cash and Bank a/c

c. Accrued Revenue or Revenue Receivable

Accrued revenue is shown as a current asset in the balance sheet and second effect goes to revenue account in the Trading & Profit and Loss account.

Double entry:

Accrued revenue a/c

Revenue a/c

d. Unearned Revenue or Revenue Received in Advance

Unearned revenue is shown as a current liability in the Balance Sheet corresponding effect goes to cash and bank account in the balance Sheet.

Double entry:

Cash and Bank a/c

Unearned revenue a/c

e. Depreciation of Asset

Depreciation is shown as an expense in the Trading & Profit and Loss account and the corresponding effect goes to provision of depreciation in the balance sheet.

Double entry:

Depreciation expense a/c

Provision for depreciation a/c

Question No: 59 ( Marks: 10 )

Mr. A, Mr. B and Mr. C entered into partnership on 1st January 2007 contributing Rs.15, 000, Rs.10, 000 and Rs.18, 000. Mr. A invested Rs.6, 000 as additional capital on 1st May, Mr. B brought additional capital of Rs.4, 000 on 1st October and Mr. C brought additional capital of Rs.8, 000 on 1st October. They earned a profit of Rs.10, 500 during the year. Profits are to be shared in their capital ratio. Calculate partners share of profit and pass the necessary journal entry. Financial year ends on 31st December.

Contributed on

Mr. A

Mr. B

Mr. C

Total in Rs.

January 01, 07

15,000

10,000

18,000

43,000

May 01, 07

6,000

—

—

6,000

October 01, 07

—

4,000

—

4,000

October 01, 07

—

—

8,000

8,000

21,000

14,000

26,000

61,000

Sharing percentage

34.43%

22.95%

42.62%

100%

Share of profit

3,615

2,410

4,475

10,500

Dr (Rs.)

Cr. (Rs.)

Profit for the year

10,500

Partner’s account

Mr. A

3,615

Mr. B

2,410

Mr. C

4,475

10,500

10,500

Paper no 29

Solved by Chanda Rehman, Nomi chakwal ABr

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 3)

Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Double entry accounting system includes:

► Accrual accounting only

► Cash accounting only

► Both cash and accrual accounting

► None of the given options

Question No: 2 ( Marks: 1 ) – Please choose one

What will be the effect on accounting equation, when payment is made to the creditor of the business?

► Increase in an asset, increase in owner’s equity

► Increase in an asset, increase in a liability

► Decrease in an asset, decrease in owner’s equity

► Decrease in an asset, decrease in a liability

Question No: 3 ( Marks: 1 ) – Please choose one

Which of the following is CORRECT about the flow of recording a transaction?

An informal accounting statement that lists the ledger account balances at a point in time and compares the total of debit balances with the total of credit balances is known as:

► Income Statement

► Balance Sheet

► Trial Balance

► Cash Book

Question No: 5 ( Marks: 1 ) – Please choose one

The unfavorable balance of Profit and Loss account should be:

► Added in liabilities

► Subtracted from current assets

► Subtracted from liabilities

► Subtracted from capital

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following account will be credited, if business purchased a vehicle on cash?

► Vehicle account

► Cash account

► Business account

► Bank account

Question No: 7 ( Marks: 1 ) – Please choose one

The total of all costs incurred to convert raw material into finished goods is known as:

► Prime cost

► Conversion cost

► Sunk cost

► Opportunity cost

Question No: 8 ( Marks: 1 ) – Please choose one

A decrease in value of a fixed asset due to age, wear and tear is known as:

► Depreciation

► Accumulated Depreciation

► Appreciation

► Written Down Value

Question No: 9 ( Marks: 1 ) – Please choose one

The cost of moving plant and machinery to a new site will be treated as:

► Revenue expense

► Capital expense

► Administrative expense

► Operating expense

Question No: 10 ( Marks: 1 ) – Please choose one

Depreciation arises because of:

► Fall in the market value of an asset

► Fall in the value of money

► Physical wear and tear

► All of the given options

Question No: 11 ( Marks: 1 ) – Please choose one

Which one of the following is NOT true about revaluation of fixed assets?

► Revaluation should be made after regular intervals

► Change in value should be permanent

► Only relevant asset should be revalued in the whole class of asset

► The profit or loss will be transferred to revaluation account

Question No: 12 ( Marks: 1 ) – Please choose one

A Bank Reconciliation Statement is prepared to:

► Ascertain that the difference between the Cash Book balance and the Bank Statement balance has been accounted for

► Correct errors in the Cash Book or errors in the Bank Statement

► Amend the balance of the Bank Statement of the firm

► Amend the balance in the Cash Book of the firm

Question No: 13 ( Marks: 1 ) – Please choose one

Bank Statement is a record of transactions between the bank and the holder of:

► A foreign currency account

► A current account

► A saving account

► All of the given options

Question No: 14 ( Marks: 1 ) – Please choose one

Which one of the following transactions will cause the balance in Mr. Terry’s Cash Book to be greater than his Bank Statement balance?

► A cheque is drawn but not yet presented at the bank for payment

► The bank has not yet notified to Mr. Terry about a dishonoured cheque

► A credit transfer into Terry’s Bank Account

► A cheque payment of Rs.101 is recorded in the Cash Book as Rs.110

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following option is TRUE about the characteristic(s) of Bad Debt?

► It is a definite loss to the business

► It is not shown in Balance Sheet

► No provision is necessary for it

► All of the given options

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following account will be debited, when the bad debts are recovered?

► Bad debt recovered a/c

► Cash a/c

► Doubtful debts a/c

► Bad debts a/c

Question No: 17 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

6,000

Current year’s provision (new)

1,500

► Rs. (5,100)

► Rs. 5,100

► Rs. (900)

► Rs. 900

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

► A’s account (Dr.) and B’s account (Cr.)

► B’s account (Dr.) and A’s account (Cr.)

► Sales account (Dr.) and B’s account (cr.)

► B’s account (Dr.) and Sales account (Cr.)

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 20 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,600

► Rs. 2,000

► Rs. 2,600

Question No: 21 ( Marks: 1 ) – Please choose one

Which one of the following is TRUE about provisions?

► It is necessary to prepare for showing true picture of balance sheet

► It is a reduction from assets

► It is prepared for specific purposes

► All of the given options

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following is/are TRUE about the sole trader form of business?

► Sole traders do not need to consult accountants

► Sole traders must register the name of their business with the Registrar of Companies

► All of the given options

► A sole trader is liable to pay income tax on his/her earnings

Question No: 23 ( Marks: 1 ) – Please choose one

Which of the following is TRUE about the treatment of insurance paid in advance Rs. 13,000?

► It will be treated as an other income in Profit & Loss Account

► It will be treated as a current asset in Balance Sheet

► It will be treated as a current liability in Balance Sheet

► It will be treated as an accrued expense in Balance Sheet

Question No: 24 ( Marks: 1 ) – Please choose one

Rent receivable (given in trial balance) is an item of_____________.

► Balance Sheet

► Profit & Loss Account

► Trading Account

► Both Balance Sheet and Profit & Loss Account

Question No: 25 ( Marks: 1 ) – Please choose one

What will the effects on financial statements, if machinery is depreciated @ 10%?

► It will be treated as an expense in income statement only

► It will be subtracted from concerned asset only

► It will be treated as a current asset only

► It will be treated as an expense in income statement and subtracted from concerned assets in Balance Sheet

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is TRUE about a merchandising company?

► A merchandising company’s business is to buy and sell products

► A merchandising company must use the perpetual system to account for merchandising inventory

► A merchandising company’s business is to provide services

► A Sugar Mill is an example of a merchandising company

Question No: 27 ( Marks: 1 ) – Please choose one

Identify the selling expenses of manufacturing concern with the help of given data.

Particulars

Rs.

Salesman’s salary

70,000

Commission on sales

28,000

Carriage outward

10,000

Carriage inward

5,000

► Rs. 80,000

► Rs. 60,000

► Rs. 38,000

► Rs. 1, 08,000

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following statements is NOT TRUE about the partnership form of business?

► A partnership is a business run by two or more persons

► A partnership business is easy to set up

► Each partner is liable under the law for the actions of other partners

► In the absence of agreement, partners will be paid salaries

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when interest on capital is charged against the distribution of profit?

► Interest account

► Partner’s capital account

► Profit and Loss account

► Profit and loss appropriation account

Question No: 30 ( Marks: 1 ) – Please choose one

When preparing a cash flow statement, which of the following would be classified as a financing activity?

≡ A new long-term loan taken out to finance the purchase of fixed

assets

≡ Salaries paid

≡ Interest paid on a long-term bank loan

≡ The cost of purchasing a patent

Question No: 31 ( Marks: 1 ) – Please choose one

When preparing cash flow statements, the repayments of a loan during the year should be included under which of the following heading?

► Operating activities doubted

► Financing activities

► Investing activities

► None of the given options

Question No: 32 ( Marks: 1 ) – Please choose one

An example of financing activities in the context of cash flow statement is:

► Capital expenditures on purchase of fixed assets

► Long-term deposit

► Financial charges paid

► Dividend paid no idea

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following business publishes the Financial Statements?

► Sole-Proprietorship

► Partnership

► Trust

► Public Limited Company

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the given Asset is Not included in the calculation acid test ratio?

► Stock

► Cash

► Debtors

► Bills Receivable

Question No: 35 ( Marks: 1 ) – Please choose one

Which of the following ratio tells about “How a company would repays its loans”

► Mark up cover ratio not sure ► Acid test ratio

► Current ratio

► Debt Equity ratio

Question No: 36 ( Marks: 1 ) – Please choose one

Rs.

Gross profit

50,000

Operating profit

42,000

Sales

250, 000

What is the amount of operating expenses

?

► Rs. 8,000

► Rs. 92,000

► Rs. 62,500

► Rs. 300,000

Question No: 37 ( Marks: 1 ) – Please choose one

Debenture is also named as:

► Share

► Bond

► Equity

► Reserve

Question No: 38 ( Marks: 1 ) – Please choose one

What is the treatment of Accumulated Depreciation in Balance Sheet?

► It may treated as a deficit

► It may treated as a surplus

► It may treated as a revenue

► None of the given options not sure

Question No: 39 ( Marks: 1 ) – Please choose one

An accounting system is used by a business to:

► Analyze transactions

► Handle routine book-keeping tasks

► Classify and summarize financial information

► All of the given options

Question No: 40 ( Marks: 1 ) – Please choose one

Which one of the following vouchers is used to record the non-cash transactions?

► Journal Vouchers

► Receipt Vouchers

► Payment Vouchers

► Nominal Vouchers

Question No: 41 ( Marks: 1 ) – Please choose one

What would be the value of ‘cost of goods manufactured’ if the total factory cost of the month is Rs. 6,000, opening work in process is Rs. 2,000 and the closing work in process is Rs. 2,500?

► Rs. 5,500

► Rs. 8,000

► Rs. 4,500

► Rs. 8,500

Question No: 42 ( Marks: 1 ) – Please choose one

Particulars

Rs.

Direct materials costs

80,000

Direct labor costs

50,000

Manufacturing overhead costs

60,000

Prime cost

?

► Rs.130, 000

► Rs.110, 000

► Rs.140, 000

► Rs.190, 000

Question No: 43 ( Marks: 1 ) – Please choose one

When we close bad debts account, which of the following account is credited?

► Profit and loss account

► Bad debt account

► Debtor account

► Provision for bad debt account

Question No: 44 ( Marks: 1 ) – Please choose one

Which of the following statement is correct? If a company fails to record estimated bad debts expense,

► Net realizable value is understated

► Expenses are understated

► Revenues are understated

► Receivables are understated

Question No: 45 ( Marks: 1 ) – Please choose one

In a partnership of Mr. A and Mr. B, the share of profit of Mr. A is Rs.75,375 and the share of profit of Mr. B is Rs. 25,125. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 3:1

Question No: 46 ( Marks: 1 ) – Please choose one

Which of the following is the major benefit of a partnership over a sole proprietorship?

► Unlimited liability

► Single tax filing

► Difficult ownership resale

► Raising capital

Question No: 47 ( Marks: 1 ) – Please choose one

Which of the following is used to convert accounting information from the cash basis of accounting to the accrual basis of accounting?

► Ledger

► Journal entries

► Adjusted entries

► Trial balance

Question No: 48 ( Marks: 1 ) – Please choose one

Unexpired costs are reported as:

► Revenues

► Expenses

► Assets

► Income

Question No: 49 ( Marks: 1 ) – Please choose one

The weekly or biweekly compensation received by hourly-paid employees is called:

► Salary

► Wages

► Income

► Profit

Question No: 50 ( Marks: 1 ) – Please choose one

Income tax expense of Eden Corporation shows a debit balance of Rs.7,000 in its unadjusted trial balance and Rs.7,600 in adjusted trial balance. Which of the following account will be debited in adjusting entry?

► Income tax payable

► Prepaid income tax

► Income tax expense

► Income tax paid

Question No: 51 ( Marks: 1 ) – Please choose one

Which of the following capital is offered to the general public?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following capital is taken up by the general public?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 53 ( Marks: 1 ) – Please choose one

With reference to the statement of cash flows the transactions involving production and delivering goods or providing services must be classified as:

► Business activities

► Operating activities

► Financing activities

► Investing activities

Question No: 54 ( Marks: 1 ) – Please choose one

According to the statement of cash flows following are the examples of investing activities except:

► Sales of machinery

► Capital invested by the owners

► Purchase of building for the business use

► Cash received from the disposal of equipment

Question No: 55 ( Marks: 3 )

How bad debts & provision for doubtful debts (new and old) are treated in profit and loss account.

Question No: 56 ( Marks: 5 )

Differentiate the following terms and also mention how these are treated in financial Statements.

v Carriage inwards and carriage outwards

v Returns inwards and returns outwards

Question No: 57 ( Marks: 5 )

Following information is extracted from the books of Abrar Ltd as on December 31st, 2007.

Particulars

Rs

Carriage inwards

8,000

Legal charges

6,500

Financial charges

223,500

Tax payable

30,000

Advances from customer

10,000

General reserve

40,000

Accumulated profit brought forward(credit balance )

95,000

Long term loans

100,000

Additional information

The authorized capital is Rs. 5,000,000 divided into 500,000 shares of Rs. 10 each. Issued and paid up capital 2500,000.

You are required to calculate Share holders equity

Question No: 58 ( Marks: 10 )

Write down the at least ten distinguishing features of a limited company which differentiate it from sole proprietor business

Question No: 59 ( Marks: 10 )

The following is the trial balance of Sikander’s Photo Studio, Inc., dated December 31, 2007. The net income for the period is Rs.36,000. You are required to prepare Balance Sheet as on December 31, 2007.

Sikander’s Photo Studio, Inc. Trial balance

December 31, 2007

Cash

Rs.171,100

Accounts receivable

9,400

Prepaid studio rent

3,000

Unexpired insurance

7,200

Supplies

500

Equipment

18,000

Accumulated depreciation: equipment

Rs.7,200

Notes payable

10,000

Accounts payable

3,200

Salaries payable

4,000

Income tax payable

6,000

Unearned revenue

8,800

Capital stock

100,000

Retained earnings

34,000

Revenue earned

165,000

Salary expense

85,000

Supply expense

3,900

Rent expense

12,000

Insurance expense

1,900

Advertising expense

500

Depreciation expense: equipment

1,800

Interest expense

900

Income taxes expense

23,000

338,200

338,200

Paper no 30

Solved by Chanda Rehman, Nomi chakwal, ABr

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 4)

Ref No: 1195706 Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Word “Credit” is derived from ______ language.

► Latin

► English

► French

► Chinese

Question No: 2 ( Marks: 1 ) – Please choose one

What is the nature of an expense account?

► Debit

► Credit

► Revenue

► None of the given options

Question No: 3 ( Marks: 1 ) – Please choose one

A summarized record of transactions related to individuals or things is called a/an

___________.

► Account

► Voucher

► Journal

► Trial balance

Question No: 4 ( Marks: 1 ) – Please choose one

In an account, if credit side < debit side then the balance is known as:

► Negative Balance

► Debit Balance

► Positive Balance

► Credit Balance

Question No: 5 ( Marks: 1 ) – Please choose one

Which of the following organizations do NOT prepare Income & Expenditure account?

► Public limited companies

► Private limited companies

► Partnership firms

► All of the given options

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following account will be credited in the books of XYZ Co. Ltd, if the business purchased a vehicle though cheque?

► Vehicle account

► Cash account

► Business account

► Bank account

Question No: 7 ( Marks: 1 ) – Please choose one

If the cost of sales is Rs. 60,000, sales are Rs. 90,000 and operating expenses are Rs. 25,000 during the year. What would be the Net Profit?

► Rs. 5,000

► Rs. 25,000

► Rs. 55,000

► Rs. 60,000

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following financial statement DO NOT show the financial health of a business at a specific date?

► Profit and loss account

► Balance sheet

► Statement of financial position

► All of the given options

Question No: 9 ( Marks: 1 ) – Please choose one

The total of all costs incurred to convert raw material into finished goods is known as:

► Prime cost

► Conversion cost

► Sunk cost

► Opportunity cost

Question No: 10 ( Marks: 1 ) – Please choose one

Which of the following particular is NOT included in the specimen of a Journal Voucher?

► Name of organization

► Bank receipt

► Debit amount

► Credit amount

Question No: 11 ( Marks: 1 ) – Please choose one

Accountancy covers which of the following area(s):

► Book-keeping

► Accounting

► Auditing

► All of the given options

Question No: 12 ( Marks: 1 ) – Please choose one

Depreciation arises because of:

► Fall in the market value of an asset

► Fall in the value of money

► Physical wear and tear

► All of the given options

Question No: 13 ( Marks: 1 ) – Please choose one

Which of the following account will be debited, when the bad debts are recovered?

► Bad debt recovered a/c

► Cash a/c

► Doubtful debts a/c

► Bad debts a/c

Question No: 14 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

800

► Rs. 400

► Rs. 800

► Rs. 2,000

► Rs. 2,400

Question No: 15 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

6,000

Current year’s provision (new)

1,500

► Rs. (5,100)

► Rs. 5,100

► Rs. (900)

► Rs. 900

Question No: 16 ( Marks: 1 ) – Please choose one

On which of the following system control accounts are based?

► Double entry book keeping system

► Single entry book keeping system

► Cash accounting system

► All of the given options

Question No: 17 ( Marks: 1 ) – Please choose one

Which of the following entry will be passed to record discount received in control account?

► Discount Received (Dr) and Creditors Control A/c (Cr)

► Discount Received (Dr) and Creditors A/c (Cr)

► Creditors Control A/c (Dr) and Discount Received (Cr)

► Creditors A/c (Dr) and Discount Received (Cr)

Question No: 18 ( Marks: 1 ) – Please choose one

A receipt of cash Rs. 10,000 from Mr. Bilal is recorded as Rs. 1,000. What amount will be adjusted in rectifying entry?

► Rs. 1,000

► Rs. 9,000

► Rs. 10,000

► Rs. 11,000

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

► A’s account (Dr.) and B’s account (Cr.)

► B’s account (Dr.) and A’s account (Cr.)

► Sales account (Dr.) and B’s account (cr.)

► B’s account (Dr.) and Sales account (Cr.)

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of Sale to Mr.”A” Rs. 336 was not recorded at all?

► Only sales account

► Only A’s account

► Only cash account

► Both sales account and A’s account

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 22

( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be deducted from

Sundry Debtors in Balance Sheet.

Particulars

Rs.

Bad debts (from trial balance)

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,000

► Rs. 2,000

► Rs. 2,600

Question No: 23

( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Bad Debts (Given in trial balance)

500

Old provisions (Given in trial balance)

700

Sundry Debtors (Given in trial balance)

44,800

If the Provision for doubtful debts has been increased by 5%, which amount of new provision will be shown in Profit & Loss Account?

► Rs. 2,240

► Rs. 2,425

► Rs. 1,925

► Rs. 3,025

Question No: 24 ( Marks: 1 ) – Please choose one

The main objective of financial reporting is to provide:

► Essential information to internal users of financial reports.

► Useful economic information about the business to the external parties for sound financial decisions.

► Information to internal users about the cash position of the business.

► Information to the Securities Exchange Commission (SEC).

Question No: 25 ( Marks: 1 ) – Please choose one

A financial statement that indicates the success or failure of a business, over a period of time is called:

► A cash flow statement

► A retained earnings statement

► An income statement

► A balance sheet

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor?

► Fixed assets

► Current liabilities

► Profit sharing ratio

► Long term assets

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the Accounts receivable?

► Accounts receivable arises when a company buys goods or services from another party on credit

► Accounts receivable is a miscellaneous category that may include loans to employees

► Accounts receivable are more formal than notes receivable

► Accounts receivable are often called trade receivables

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following account will be debited when the interest on drawings is charged?

► Partner’s capital account

► Interest account

► Partner’s current account

► Profit & Loss account

Question No: 29 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

► Name of company

► Place of registered office of company

► Objective of the company

► All of the given options

Question No: 31 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

► Share premium account

► Share holder account

► Debtors control account

► Creditor control account

Question No: 32 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if provision for Income Tax to be made Rs. 12,000 is given in adjustment?

► It will be deducted in Income Statement only

► It will be treated as current liability in balance sheet only

► It will be treated as current asset in balance sheet only

► Both it will be deducted in income statement and it will be treated as current liability in balance sheet

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following is NOT a cash inflow?

► Sale of fixed asset

► Issue of debentures

► Cash from business operation

► Purchase of fixed asset

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the following statement in NOT TRUE about the limited company form of business?

► The limited company form of business allows ownership of the business to be spread amongst many people

► Shareholders can appoint professionals

► Shareholders are personally liable for all the liabilities incurred by the business

► Regular filing of information about the affairs of the company is a legal requirement

Question No: 35 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.

► Rs. 98,000

► Rs. 1, 47,000

► Rs. 2, 45,000

► Rs. 3, 43,000

Question No: 36 ( Marks: 1 ) – Please choose one

What is the treatment of Accumulated Depreciation in Balance Sheet?

► It may treated as a deficit

► It may treated as a surplus

► It may treated as a revenue

► None of the given options doubted

Question No: 37 ( Marks: 1 ) – Please choose one

According to the double entry system of book keeping, the investment of Rs.10, 000 in the business made by the owner will effect:

► Cash Account & Capital Account

► Cash Account & Expense Account

► Capital Account & Revenue Account

► Capital Account & Expense Account

Question No: 38 ( Marks: 1 ) – Please choose one

The return of goods by a customer should be debited to:

► Customer’s account

► Sales return account

► Goods account

► Accounts receivable account

Question No: 39 ( Marks: 1 ) – Please choose one

Expenditures incurred annually on renewal of patent are known as:

► Revenue Expenditures

► Capital Expenditures

► Deferred Expenditures doubted

► None of the given options

Question No: 40 ( Marks: 1 ) – Please choose one

Debts that are not collectible and worthless to the creditor are known as:

► Doubtful debts

► Bad debts

► Provision for doubtful debts

► Loss

Question No: 41 ( Marks: 1 ) – Please choose one

ABC Company received discount on its credit purchases, which of the following will be debited while entering in journal?

► Cash

► Discount received

► Creditors

► Bank

Question No: 42 ( Marks: 1 ) – Please choose one

The amount owed by debtors at the start of a month appears on the ___________ side of the individual debtors account.

► Left side or credit

► Left side or debit

► Right side or debit

► Right side or credit

Question No: 43 ( Marks: 1 ) – Please choose one

Ahmad Industries want to make payment to its supplier in the form of a pay order. The bank deducted Rs.160 as service charges without its knowledge. The error is known as:

► Error of commission

► Error of omission

► Error of original entry

► Error of principle

Question No: 44 ( Marks: 1 ) – Please choose one

Which of the following accounts would never be reported in the income statement as an expense?

► Depreciation expense

► Income tax expense

► Interest expense

► Dividends expense

Question No: 45 ( Marks: 1 ) – Please choose one

In the heading of financial statement, ___________ is not required?

► Title of financial statement

► Name of the person who prepares financial statement

► Period for which financial statement is prepared

► Name of business entity

Question No: 46 ( Marks: 1 ) – Please choose one

In a partnership of Mr. A and Mr. B, the share of profit of Mr. A is Rs.75,375 and the share of profit of Mr. B is Rs. 25,125. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 3:1

Question No: 47 ( Marks: 1 ) – Please choose one

Which of the following is decreased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 48 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal investment and equal share in profit or loss. Markup on capital of Mr. A is Rs.2,500 and markup on drawings of Mr. B is Rs.2,800. The net income for the year is Rs.95,000. What will be the amount of distributable profit?

► Rs.89,700

► Rs.94,700

► Rs.95,300

► Rs.100,300

Question No: 49 ( Marks: 1 ) – Please choose one

How many members can subscribe their names in memorandum of association for registration of public limited company?

► 2

► 3

► 5

► 7

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following is responsible to register the companies?

► State Bank of Pakistan

► Security and Exchange Commission of Pakistan

► Supreme Court

► Stock Exchange

Question No: 51 ( Marks: 1 ) – Please choose one

The amount of share premium can be utilized except:

► To write off preliminary expenses

► To meet the expenses of issue of shares

► To distribute among the share holders

► To issue bonus shares

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following capital is required for the registration of the company?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 53 ( Marks: 1 ) – Please choose one

Which of the following items of balance sheet are useful in evaluating a company’s liquidity?

► Current assets and other assets

► Current liabilities and current assets

► Current liabilities and plant and equipment

► Non current liabilities and other assets

Question No: 54 ( Marks: 1 ) – Please choose one

The company ABC purchased an asset for Rs. 40,000, paying 30,000 in cash and issuing a long term note payable for remaining balance. The amount will be recorded in statement of cash flows as:

► Rs. 40,000 cash outflow as investing activity

► Rs. 30,000 cash outflow as investing activity doubted

► Rs. 10,000 cash inflow as investing activity

► Rs. 70,000 cash inflow as investing activity

Question No: 55 ( Marks: 3 )

Why an organization is needed to prepare a cash flow statement.

Question No: 56 ( Marks: 5 )

Show the following assets at Written Down Value in Balance Sheet with complete working.

Particulars

Rs.

Plant & Machinery

53,000

Buildings

35,000

Tools & Equipment

8,650

Depreciation Rate:

v Plant & Machinery @ 10%

v Buildings @ 5%

v Tools& Equipment @ 15%

Question No: 57 ( Marks: 5 )

Financial year decided by partnership agreement is 1st July to 30th June. Mr. Ali is partner and having a capital of Rs. 1,500,000 on July 1st 2007 and he introduced more capital on August 1st 2007 Rs. 10,000 on April 1st 2008, Rs.500,000 and on June 1st 2008 , Rs. 5,000. Mark up rate is 10% p.a.

Calculate mark up on Mr. Ali’s capital for the year ending on 30th June 2008.

Question No: 58 ( Marks: 10 )

The following errors have been discovered in the book of a Business Concern:

Wage of Rs. 500 paid for the installation of plant debited to Wages Account.

Purchases of Office Equipment Rs. 2,000 were recorded as regular purchases of business.

Credit sale of Rs. 600 to Kareem was wrongly debited to Kamran.

Rs. 200 drawn by the proprietor was treated as Trade Expenses.

Rs. 300 received as a Commission was wrongly credited to Sales Account.

Required:

Pass the rectifying entries only.

Question No: 59 ( Marks: 10 )

Prepare Balance Sheet for the manufacturing concern as on 31st December, 2007 with the help of given data.

When the Bank Statement balance is more than the Cash Book balance, it is because of:

► Unpresented cheques

► Unrecorded bank charges

► Uncredited cheques

► None of the given options

Question No: 18 ( Marks: 1 ) – Please choose one

Upon checking the Bank Statement against the Cash Book by Mr. A, It was discovered that an amount of Rs.120 for dividend from XYZ Co. had not been entered in the Cash Book. Which of the following entry should be recorded to rectify the mistake?

► Bank Account(Dr.) and Dividend Account (Cr.)

► XYZ Co. Account (Dr.) and Bank Account (Cr.)

► Dividend Account (Dr.) and Bank Account (Cr.)

► Bank Account (Dr.) and XYZ Co. Account (Cr.)

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following subsidiary book(s) is (are) maintained for debtors control account?

► Sales Day Book

► Sales Return

► Debtors Ledger

► All of the given options

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following is shown on credit side of creditors control account?

► Bills Receivable

► Return inwards

► Credit purchases

► Discount allowed

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of carriage charges, paid for a new plant purchased mistakenly debited to carriage account?

► Plant account

► Carriage account

► Both plant account and carriage account

► Trading account

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

If the Provision for doubtful debts has been increased by 5%, which amount of new provision will be shown in Profit & Loss Account?

► Rs. 2,240

► Rs. 2,425

► Rs. 1,925

► Rs. 3,025

Question No: 24 ( Marks: 1 ) – Please choose one

An asset which is NOT easily convertible to cash or not expected to become cash within a period of twelve months is called:

► Liquid asset

► Current asset

► Fixed asset

► Floating asset

Question No: 25 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is CORRECT if depreciation is given in trial balance?

► All of the given options are correct

► It means depreciation has already been deducted from concerned asset account

► It will be shown as an expense in income statement only

► It will not be deducted from concerned asset in Balance Sheet

Question No: 27 ( Marks: 1 ) – Please choose one

Identify the selling expenses of manufacturing concern with the help of given data.

Particulars

Rs.

Salesman’s salary

70,000

Commission on sales

28,000

Carriage outward

10,000

Carriage inward

5,000

► Rs. 80,000

► Rs. 60,000

► Rs. 38,000

► Rs. 1, 08,000

Question No: 28 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

► Name of company

► Place of registered office of company

► Objective of the company

► All of the given options

Question No: 30 ( Marks: 1 ) – Please choose one

In Income Statement, both beginning inventory and ending inventory appear in the section of:

► Cost of good sold

► Indirect cost

► Selling cost

► Factory over head cost

Question No: 31 ( Marks: 1 ) – Please choose one

In which of the following auditor’s remuneration payable is shown?

► In balance sheet under the head of current liabilities only

► In balance sheet under the head of current assets only

► In income statement under the administrative expense only

► In both balance sheet under the head of current liabilities and income statement under the administrative expense

Question No: 32 ( Marks: 1 ) – Please choose one

How dividend declared is treated in the Balance Sheet of the company?

► Provision

► Current liability

► Reserves and surplus

► Current assets

Question No: 33 ( Marks: 1 ) – Please choose one

The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable and an ending balance of Rs. 15,000. Credit Sales of Rs. 200,000 were made during the year. Using this information, compute cash collected from customers.

► Rs. 205,000

► Rs. 215,000

► Rs. 195,000

► Rs. 200,000

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the following statement in NOT TRUE about the limited company form of business?

► The limited company form of business allows ownership of the business to be spread amongst many people

► Shareholders can appoint professionals

► Shareholders are personally liable for all the liabilities incurred by the business

► Regular filing of information about the affairs of the company is a legal requirement

Question No: 35 ( Marks: 1 ) – Please choose one

In calculating earning per share (EPS), the net profit is divided by which of the following?

► Number of ordinary shares

► Number of preference shares

► Paid up capital

► Authorized capital

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the given Asset is Not included in the calculation acid test ratio?

► Stock

► Cash

► Debtors

► Bills Receivable

Question No: 37 ( Marks: 1 ) – Please choose one

Particulars

Rs.

Debentures

1, 50, 000

Equity Capital

2, 00,000

General Reserve

90, 000

Accumulated profit

60,000

What is debt equity ratio

?

► 15: 20 (or 3:4)

► 15:24 (or 5: 8)

► 15:29

► 15:35 (or 3: 7)

Question No: 38 ( Marks: 1 ) – Please choose one

Normally the practice of Book Keeping under Single Entry System is followed by:

► Small businesses only

► Governments only

► Large scale businesses only

► Both small businesses and governments

Question No: 39 ( Marks: 1 ) – Please choose one

In which of the following case the bank cannot refuse the payment?

► Stale cheque

► Bearer cheque

► Insolvency of the customer

► Post dated cheque

Question No: 40 ( Marks: 1 ) – Please choose one

Stock account is debited and creditors account is credited, which of the following is reflecting the statement?

► Discount received

► Goods returned

► Purchase of goods on credit

► Payment of goods

Question No: 41 ( Marks: 1 ) – Please choose one

Payment is made of a company’s purchases on credit, which of the following is correct:

► Debit stock account and credit creditors account

► Debit creditors account and credit cash account

► Debit cash account and credit creditors account

► Debit stock account and credit cash account

Question No: 42 ( Marks: 1 ) – Please choose one

We usually allow the customer to deduct a certain amount from the invoice value for prompt payment. In doing so we are granting a:

► Commission

► Allowance

► Discount

► Rebate

Question No: 43 ( Marks: 1 ) – Please choose one

What will be obtained from the Purchases Returns Book?

► Discount received

► Returns outward

► Credit purchases

► Discount allowed

Question No: 44 ( Marks: 1 ) – Please choose one

Deferred cost is classified as:

► Current liability

► Current asset

► Non-current asset

► Non-current liability

Question No: 45 ( Marks: 1 ) – Please choose one

Which of the following is increased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 46 ( Marks: 1 ) – Please choose one

Accumulated depreciation is a ____________ account?

► Fixed asset

► Current asset

► Contra asset

► Liability

Question No: 47 ( Marks: 1 ) – Please choose one

Failure to record ___________ will result in understates net income.

► Accrued expenses

► Expenses incurred

► Accrued revenues

► Accounts payable

Question No: 48 ( Marks: 1 ) – Please choose one

Puget Sound Co. sold marketable securities Costing Rs.80,000 for Rs.92,000 cash. In the company’s income statement and statement of cash flows, respectively, this will appear as:

► A Rs.12,000 gain and a Rs.92,000 cash receipt

► A Rs.92,000 gain and a Rs.8,000 cash receipt

► A Rs.12,000 gain and a Rs.80,000 cash receipt

► A Rs.92,000 sale and a Rs.92,000 cash receipt

Question No: 49 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the amount of distributable profit?

► Rs.81,700

► Rs.88,300

► Rs.131,700

► Rs.146,700

Question No: 50 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal investment and equal share in profit or loss. Markup on capital of Mr. A is Rs.2,000 and markup on drawings of Mr. B is Rs.3,000. The net income for the year is Rs.50,000. What will be the profit share of Mr. A?

► Rs.22,500

► Rs.25,500

► Rs.27,500

► Rs.55,000

Question No: 51 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on capital of Mr. A is Rs.2,000 and markup on drawings of Mr. B is Rs.3,000. The net income for the year is Rs.85,000. What will be the profit share of Mr. B?

► Rs.40,000

► Rs.43,000

► Rs.130,000

► Rs.133,000

Net Profit = 85 000

Add Intrest on Drawings = 3000 Less intrest on capital = 2000

Total Profit of the firm = 85 000 + 3000 – 2000 = 86 000

Profit of B = 86000 / 2 = 43000

Question No: 52 ( Marks: 1 ) – Please choose one

The value of a share as quoted on the stock exchange is known as:

► Book value

► Par value

► Market value

► Face value

Question No: 53 ( Marks: 1 ) – Please choose one

Which of the following is not a measure of short-term liquidity?

► Current ratio

► Quick ratio

► Acid-test ratio

► Debt ratio

Question No: 54 ( Marks: 1 ) – Please choose one

Short term investments in marketable securities and treasury bills that will mature within ninety days from the date of acquisition, must be classified as:

► Receivables

► Receipts from Capital

► Current and intangible assets

► Cash equivalents

Question No: 55 ( Marks: 3 )

Show how the following items will appear in profit and loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

8,500

Provision for doubtful debts (new)

1,500

Question No: 56 ( Marks: 5 )

What is the Purpose of Control Accounts?

Question No: 57 ( Marks: 5 )

Umer and Usman, both of whom are CPAs, form a partnership, with Umer investing Rs.100,000 and Usman, Rs.80,000. They agree to share net income as follows:

Any partnership earnings in excess of the amount required to cover the interest and salary allowances to be divided 60 percent to Umer and 40 percent to Usman.

The partnership net income for the first year of operations amounted to Rs.247,000 before interest and salary allowances. Show how this amount should be divided between the two partners.

Question No: 58 ( Marks: 10 )

Following information are extracted from the books of XY and Sons for the year 2007.

Particulars

Rs.

Fixed Asset at WDV

529,500

Material 31-12-2007

188,000

Work in process on 31-12-2007

178,000

Finished Goods on 31-12-2007

198,000

Debtors

160,000

Bank

7,000

Creditors

100,000

Expenses payable

15,000

Profit for the year

X:90,000

Y:80,000

Drawings for the year

X:10,000

Y:15,000

Capital

X:400,000

Y: 350,000

Current Account

X: 13,000

Y:10,000

Long term loans

2,27,500

You are required to prepare Balance Sheet as on 31st December 2007. Show complete working.

Question No: 59 ( Marks: 10 )

Prepare Bank Reconciliation Statement as on 31st March 2009 with the help of given data.

Particulars

Rs.

1

Balance as per Cash Book (Dr.)

180,000

2

Cheques paid into Bank in March 2009 but credited by the bank in April 2009

7,900

4,500

1,300

3

Cheques issued in March 2009 but cashed in April 2009

11,000

5,800

4

Cheques entered in the Cash Book in March 2009 but paid into bank in April 2009

1,000

5

Interest allowed by the bank

2,500

6

Interest charged by the bank

500

Paper no 32

Solved by Chanda Rehman, Nomi chakwal ABrFINALTERM

EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 4)

Ref No: 1195876 Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Shares for which amount is paid by public are called ________ shares.

► Paid up

► Authorized

► Bonus shares

► All are correct options

Question No: 2 ( Marks: 1 ) – Please choose one

If a business purchases machinery for Rs. 30,000 on 31st January 2008 having life of 10 years, this expense will be realized ___________ under the concept of accrual accounting.

► For the year 2008 only

► For the last day of 10th year only

► Over 10 years

► Nothing can be said about it

Question No: 3 ( Marks: 1 ) – Please choose one

What is the nature of an expense account?

► Debit

► Credit

► Revenue

► None of the given options

Question No: 4 ( Marks: 1 ) – Please choose one

A summarized record of transactions related to individuals or things is called a/an

___________.

► Account

► Voucher

► Journal

► Trial balance

Question No: 5 ( Marks: 1 ) – Please choose one

Which one of the following is NOT prepared by Non profit organizations?

► Profit & Loss account

► Income & Expenditure account

► Receipts & Payments account

► Balance Sheet

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following organizations prepare Income & Expenditure account?

► Public libraries

► NGOs

► Labor unions

► All of the given options

Question No: 7 ( Marks: 1 ) – Please choose one

The favorable balance of Profit and Loss account should be:

► Added in liabilities

► Subtracted from current assets

► Subtracted from liabilities

► Added in capital

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following entry will be recorded in the books of accounts for the goods returned to Mr. ‘A’?

► Purchases return account (Dr) and Trading account (Cr)

► Mr.” A”/ creditor account (Dr) and purchases return account (Cr)

► Purchases return account (Dr) and Mr.” A” / creditor account (Cr)

► Mr.” A”/ creditor account (Dr) and Profit & Loss account (Cr)

Question No: 9 ( Marks: 1 ) – Please choose one

Which of the following account will be credited, if business bought goods on credit from Mr. Ali?

► Purchases account

► Mr. Ali account

► Cash account

► Sales account

Question No: 10 ( Marks: 1 ) – Please choose one

If the cost of sales is Rs.1,00,000, sales are Rs. 300,000 and operating expenses Rs. 200,000 during the year. What would be the Gross Profit?

► Rs. 5,000

► Rs. 1, 00,000

► Rs.1, 05,000

► Rs. 2, 00,000

Question No: 11 ( Marks: 1 ) – Please choose one

Partially completed products that are not yet ready for sale are known as:

► Raw material

► Work in process

► Finished goods

► Closing stock

Question No: 12 ( Marks: 1 ) – Please choose one

In the cost of goods sold statement, Cost of direct material consumed + Direct labor=?

► Conversion cost

► Prime cost

► Total factory cost

► Cost of goods manufactured

Question No: 13 ( Marks: 1 ) – Please choose one

The Primary objective of providing depreciation is:

► To calculate true profit

► To show the asset on market value

► To reduce tax Burdon

► To provide funds for replacement

Question No: 14 ( Marks: 1 ) – Please choose one

Under the reducing balance method of depreciation:

► Amount of depreciation increases every year

► Amount of depreciation remains constant for every year

► Amount of depreciation decreases every year

► None of the given options

Question No: 15 ( Marks: 1 ) – Please choose one

Particulars

Rs.

Opening written down value of machine

1,00,000

Cost of new machine purchased during the year

50,000

Depreciation during the year

21,000

Closing written down value (WDV)

?

► Rs. 1, 29,000

► Rs. 1, 50,000

► Rs. 1, 21,000

► Rs. 71,000

Question No: 16 ( Marks: 1 ) – Please choose one

In which of the following condition(s) DEBT is regarded as BAD.

► Bankruptcy of the debtor

► Disappearance of debtor’s business

► Failure of repeated attempt to collect the debt

► All of the given options

Question No: 17 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

6,000

Current year’s provision (new)

1,500

► Rs. (5,100)

► Rs. 5,100

► Rs. (900)

► Rs. 900

Question No: 18 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Write off Bad debts (given in adjustments)

2,400

Sundry Debtors (given in trial balance)

33,200

Provision is created on Debtors at 5%

Requirement: Identify the Total amount which will deduct from Sundry debtors.

► Rs. 460

► Rs. 2,400

► Rs. 1,540

► Rs. 3,940

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of carriage charges, paid for a new plant purchased mistakenly debited to carriage account?

► Plant account

► Carriage account

► Both plant account and carriage account

► Trading account

Question No: 20 ( Marks: 1 ) – Please choose one

_____ are committed in those cases where proper distinction between revenue and capital items is not made.

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 21 ( Marks: 1 ) – Please choose one

A receipt of cash Rs. 10,000 from Mr. Bilal is recorded as Rs. 1,000. What amount will be adjusted in rectifying entry?

► Rs. 1,000

► Rs. 9,000

► Rs. 10,000

► Rs. 11,000

Question No: 22 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,600

► Rs. 2,000

► Rs. 2,600

Question No: 23 ( Marks: 1 ) – Please choose one

The main objective of financial reporting is to provide:

► Essential information to internal users of financial reports.

► Useful economic information about the business to the external parties for sound financial decisions.

► Information to internal users about the cash position of the business.

► Information to the Securities Exchange Commission (SEC).

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following journal entry will be recorded, if cash is drawn by a Proprietor?

► Proprietor’s drawings a/c (Dr.) and Cash a/c (Cr.)

► Cash a/c (Dr.) and Proprietor’s drawings a/c (Cr.)

► Proprietor’s Capital (Dr.) and Proprietor’s drawings a/c (Cr.)

► Proprietor’s drawings (Dr.) and Proprietor’s Capital a/c (Cr.)

Question No: 25 ( Marks: 1 ) – Please choose one

Which of the following item will be shown on debit side of capital account of sole proprietor?

► Cash

► Drawings

► Debtors

► Profit

Question No: 26 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 27 ( Marks: 1 ) – Please choose one

Fixed Assets (WDV) + Working Capital =?

► Total assets employed

► Total liabilities

► Total assets

► Current assets

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when interest on capital is charged against the distribution of profit?

► Interest account

► Partner’s capital account

► Profit and Loss account

► Profit and loss appropriation account

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is(are) type(s) of capital account in partnership?

≡ Fixed Capital

≡ Current Capital

≡ Fluctuating Capital

≡ Both Fixed Capital and Fluctuating Capital

Question No: 30 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following is (are) type(s) of Public Limited Companies?

► Listed company

► Non listed company

► Private limited company

► Both Listed Company and non listed company

Question No: 32 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

► Name of company

► Place of registered office of company

► Objective of the company

► All of the given options

Question No: 33 ( Marks: 1 ) – Please choose one

The amount received; in excess of the face value of the shares is transferred to which of the following?

► Share capital account

► Right share

► Share premium account

► Share holder account

Question No: 34 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

► Share premium account

► Share holder account

► Debtors control account

► Creditor control account

Question No: 35 ( Marks: 1 ) – Please choose one

Which of the following account will be debited if shares issued against cash?

► Share premium account

► Cash account

► Share capital account

► Profit and loss account

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the following is the most important document of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Annual Report

Question No: 37 ( Marks: 1 ) – Please choose one

Which of the following documents contains rules and regulations for internal management of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Statutory Declaration

Question No: 38 ( Marks: 1 ) – Please choose one

How dividend declared is treated in the Balance Sheet of the company?

► Provision

► Current liability think this one

► Reserves and surplus

► Current assets

Question No: 39 ( Marks: 1 ) – Please choose one

The primary purpose of preparing a cash flow statement for an entity is to provide information about:

► Its financial position at the end of an accounting period

► Its cash receipts and cash payments during an accounting period

► Its financial position at the start of an accounting period

► None of the given options

Question No: 40 ( Marks: 1 ) – Please choose one

In cash flow statements, which of the following would appear as an inflow of cash?

► The repayments of a bank loan

► Dividend issue in the current year

► Money received as result of selling fixed assets

► The difference between the valuations of old and new fixed assets doubted

Question No: 41 ( Marks: 1 ) – Please choose one

Debenture is also named as:

► Share

► Bond

► Equity

► Reserve

Question No: 42 ( Marks: 1 ) – Please choose one

Prepaid interest given in the Trial Balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 43 ( Marks: 1 ) – Please choose one

Wages outstanding given in the trial balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 44 ( Marks: 1 ) – Please choose one

Which of the following fixed asset is normally appreciated with the passage of time?

► Land

► Vehicles

► Furniture

► Machinery

Question No: 45 ( Marks: 1 ) – Please choose one

Expenditures incurred annually on renewal of patent are known as:

► Revenue Expenditures

► Capital Expenditures doubted

► Deferred Expenditures

► None of the given options

Question No: 46 ( Marks: 1 ) – Please choose one

Accounts receivables are shown in balance sheet at:

► Net realizable value

► Total collectible amount

► Current value

► Collected amount

Question No: 47 ( Marks: 1 ) – Please choose one

Stock account is credited and creditors account is debited, which of the following is reflecting the statement?

► Discount received

► Goods returned

► Purchase of goods on credit

► Payment of goods

Question No: 48 ( Marks: 1 ) – Please choose one

Mr. Ali’s bank book shows a debit balance of Rs. 36,000. He deposited a cheque of Rs.15,000 but not yet collected by the bank. What will be the balance of bank statement?

► Rs. 21,000

► Rs. 51,000

► Rs. 36,000

► Rs. 15,000

Question No: 49 ( Marks: 1 ) – Please choose one

We usually allow the customer to deduct a certain amount from the invoice value for prompt payment. In doing so we are granting a:

► Commission

► Allowance

► Discount

► Rebate

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following is NOT a financial statement?

► Balance sheet

► Audit report

► Income statement

► Cash flow statement

Question No: 51 ( Marks: 1 ) – Please choose one

In a partnership of Mr. X and Mr. Y, the share of profit of Mr. X is Rs.3,840 and the share of profit of Mr. Y is Rs. 5,760. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 2:1

Question No: 52 ( Marks: 1 ) – Please choose one

Interest expenses of Epler Corporation shows a debit balance of Rs.200 in its unadjusted trial balance and Rs.250 in adjusted trial balance. Which of the following account will be debited in adjusting entry?

► Interest expense

► Interest payable

► Prepaid interest

► Interest paid

Question No: 53 ( Marks: 1 ) – Please choose one

The amount of share premium can be utilized except:

► To write off preliminary expenses

► To meet the expenses of issue of shares

► To distribute among the share holders

► To issue bonus shares

Question No: 54 ( Marks: 1 ) – Please choose one

Which of the following ratio cannot be computed for a period in which the company incurs a net loss?

► Acid-test ratio doubted

► Return on investment

► Price-earning ratio

► None of the given options

Question No: 55 ( Marks: 3 )

What are the benefits of subsidiary ledgers?

Answer:

When business expands the number of accounts and entries are also increased so to control the accounts in a better way subsidiary ledgers are used which give a good picture and vision of the account study and accountablility.

Following are the subsidiary ledgers used:

Sales Journals

Sales Returns

Debtors Ledgers

Question No: 56 ( Marks: 5 )

What is bank overdraft? Mention an example for this. Why companies have to pay mark up on it. Under which head mark up paid on overdraft is shown in financial statement.

Answer:

Bank Overdraft is the form of loan taken from the bank when the amount is exceeding from specific limit, and bank deduct this overdraft amount when company’s account debited, As this is the type of Loan and so company have to pay mark up as interest on the overdraft amount and depend upon the terms of agreement. In the financial statement the mark up is shown in Financial Expenses.

Question No: 57 ( Marks: 5 )

What will be the effects of given adjustments on the income statement and balance sheet?

Income statement

Balance sheet

Adjustment

Revenue

Expense

Net income

Assets

Liabilities

Owner’s

equity

Converting assets to

No effect

Increase

Decrease

Decrease

No effect

Decrease

expenses

Converting liabilities to

Increase

No Effect

NO Effect

No effect

Decrease

No effect

revenue

Accruing unpaid

No effect

Decrease

No effect

No effect

Decrease

expenses

Accruing uncollected

Increase

No effect

increase

No effect

No effect

revenue

Note: For better understanding an example is given above. Follow the format given inexample.

Question No: 58 ( Marks: 10 )

Prepare Debtors and Creditors control account from the following data. Also work out their closing balances on June 30, 2009

June 1:

Rs.

Opening balance of Debtors

58,500

Opening balance of Creditors

70,000

Details of June:

Total credit sales

44,700

Cheques and cash received

55,000

Purchase return

6,600

Total credit purchases

48,000

Discount received

2,200

Discount allowed

2,800

Cheques and cash paid

36,330

Creditors Control Account

Debit Side

Credit Side

Date

No.

Narration

Dr. Rs

Date

No.

Narration

Cr. Rs

Purchase Return

6,600

B/F

70,000

Discount

Received

2,200

Purchase

48,000

Cash/cheques

Paid

36,330

C/f

72,870

Total

1,18000

Total

118000

Debtors Control Account

Debit Side

Credit Side

Date

No.

Narration

Dr. Rs

Date

No.

Narration

Cr. Rs

B/f

58,500

Cash/Checque Rec

55,000

Total Sale

44,700

Discount

28,00

C/f

45,400

Total

10,3200

Total

10,3200

Question No: 59 ( Marks: 10 )

From the given information as at June 30, 2007, calculate fixed assets at WDV and cost of goods sold as on June 30,2008.

Building at Cost

239,500

Equipment at Cost

22,000

Vehicles at Cost

45,000

Accumulated Dep. – Building

12,250

Equipment

7,000

Vehicles

13,900

Stock Opening Balance

58,725

Sales

247,500

Purchases

136,775

Carriage

Inward

6,050

Vehicle Running

Expenses

22,300

Additional Information:

Closing stock Rs. 70,050.

Depreciation during the year o Building 6,000

o Vehicles Rs 8,500 o Equipment 4,000

Solution:

Cost of Goods Sold:

Opening Stock Balance

58,725

Add: Purchase

136,775

Add: Carriage Inward

6,050

Less: Closing Stock

(70,050)

Cost of Goods sold

131,500 Rs.

Fixed Assets:

Building (12,250)

227,250

Vehicle (13,900)

31,100

Equipment (7,000)

15,000

Total

273,350 Rs.

Paper no 33

Solved by Chanda Rehman, & ABr

Question No: 1 ( Marks: 1 ) – Please choose one

Prepaid interest given in the Trial Balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 2 ( Marks: 1 ) – Please choose one

The net income calculated in the income statement for the accounting period is reported on:

► Bank Statement

► Statement of retained earnings

► Statement of cash flows

► None of the given options

Question No: 3 ( Marks: 1 ) – Please choose one

If the Capitals of partners are fixed then, at the end of financial year a partner’s drawings are transferred to the:

► Credit side of the partner’s capital account

► Credit side of the partner’s current account

► Debit side of partnership bank account

► Debit side of the partner’s current account

Question No: 4 ( Marks: 1 ) – Please choose one

If one partner receives a salary which is credited to him at the end of the year, the share of profit available for distribution will be:

► Increased

► Decreased

► Unchanged

► Changed and become negative

Question No: 5 ( Marks: 1 ) – Please choose one

In which situation(s) Partnership is dissolved?

► In case of death of partner

► At the admission of new partner

► If any partner resigned from partnership

► All of the given options

Question No: 6 ( Marks: 1 ) – Please choose one

Rs.

Gross profit

50,000

Operating profit

42,000

Sales

250, 000

What is the amount of operating expenses

?

► Rs. 8,000

► Rs. 92,000

► Rs. 62,500

► Rs. 300,000

Question No: 7 ( Marks: 1 ) – Please choose one

Current ratio may be increased by:

► Overstating current Assets

► Overstating current Liabilities

► Understating current Assets

► Understating current assets and overstating current liabilities

Question No: 8 ( Marks: 1 ) – Please choose one

In which of the following interim dividend is treated?

► In profit and Loss account

► In profit and Loss appropriation account

► On the asset side of the Balance Sheet

► In trading account

Question No: 9 ( Marks: 1 ) – Please choose one

The statement of changes in equity basically shows the movement of:

► share capital during the year

► Capital reserves during the year

► Revenue Reserves during the year

► All of the given options not sure

Question No: 10 ( Marks: 1 ) – Please choose one

Which of the following can offer its share to general public at large?

► A private limited company

► A listed company

► A partnership firm

► A trust

Question No: 11 ( Marks: 1 ) – Please choose one

The Joint Stock Company is formed under the Companies Ordinance:

► 1984

► I884

► 1948

► 1965

Question No: 12 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 13 ( Marks: 1 ) – Please choose one

Which of the following account will be debited when the interest on drawings is charged?

► Partner’s capital account correct

► Interest account

► Partner’s current account

► Profit & Loss account

Question No: 14 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when interest on capital is charged against the distribution of profit?

► Interest account

► Partner’s capital account

► Profit and Loss account

► Profit and loss appropriation account

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the partnership form of business?

► Partners must have to share their profits in equal proportion

► Partners are personally liable for the liabilities of the business

► Partnerships must make their accounts available to the general

public

► Partnership agreement in writing is called Partnership deed

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following statements is NOT TRUE about the partnership form of business?

► A partnership is a business run by two or more persons

► A partnership business is easy to set up

► Each partner is liable under the law for the actions of other partners

► In the absence of agreement, partners will be paid salaries

Question No: 17 ( Marks: 1 ) – Please choose one

Which of the following is TRUE about the treatment of insurance paid in advance Rs. 13,000?

► It will be treated as an other income in Profit & Loss Account

► It will be treated as a current asset in Balance Sheet

► It will be treated as a current liability in Balance Sheet

► It will be treated as an accrued expense in Balance Sheet

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor?

► Fixed assets

► Current liabilities

► Profit sharing ratio

► Long term assets

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following appears in both the Income Statement debit column and the Balance Sheet credit?

Which of the following is the first phase of the typical operating cycle?

► Receive cash from customers

► Pay cash to suppliers

► Sell goods and services to customers

► Purchase goods and services

Question No: 24 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Write off Bad debts (given in adjustments)

2,400

Sundry Debtors (given in trial balance)

33,200

Provision is created on Debtors at 10%

Identify the Total amount deducted from Sundry debtors.

► Rs. 460

► Rs. 2,400

► Rs. 3,080 ( wrong)

► Rs. 5,480 ( correct)

Question No: 25 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account

► Rs. 3,600

► Rs. 4,000

► Rs. 1,600

► Rs. 2, 400

Question No: 26 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be deducted from Sundry Debtors in Balance Sheet.

Particulars

Rs.

Bad debts (from trial balance)

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,000

► Rs. 2,000

► Rs. 2,600

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of a purchase return of Rs.200 to Mr. “A” entered in sales book instead of purchase return book?

► A’s account only

► Sales account only

► Purchase returns account and sales account

► Purchases account only

Question No: 28 ( Marks: 1 ) – Please choose one

“Goods sold to Mr. Salman for Rs. 6,000 have been forgotten to enter in books of accounts”, is an example of:

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 29 ( Marks: 1 ) – Please choose one

_____ are committed in those cases where proper distinction between revenue and capital items is not made.

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of carriage charges, paid for a new plant purchased mistakenly debited to carriage account?

► Plant account

► Carriage account

► Both plant account and carriage account

► Trading account

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following entry will be passed to record discount received in control account?

► Discount Received (Dr) and Creditors Control A/c (Cr)

► Discount Received (Dr) and Creditors A/c (Cr)

► Creditors Control A/c (Dr) and Discount Received (Cr)

► Creditors A/c (Dr) and Discount Received (Cr)

Question No: 32 ( Marks: 1 ) – Please choose one

Which of the following is shown on credit side of creditors control account?

► Bills Receivable

► Return inwards

► Credit purchases

► Discount allowed

Question No: 33 ( Marks: 1 ) – Please choose one

It is supposed that on 31-12-2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 5 % of the sundry debtors are doubtful. What entry will pass to transfer the bad debts to provision for doubtful debts?

Which of the following account(s) will be affected, while rectifying the error of sales to Rahim Rs. 336 posted to his account as Rs. 363?

Sales account Rahim s account Cash account

Both sales and Rahim s Account

Question No: 27 ( Marks: 1 ) – Please choose one

When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:

Error of principle

Error of omission

Error of commission

Error of original entry

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following is the first phase of the typical operating cycle? Receive cash from customers

Pay cash to suppliers

Sell goods and services to customers Purchase goods and services

(In the first phase of the operating cycle a business, unless it is a service business, buys inventory and materials which they will resell to customers.)

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is normally treated as the last expense listed in the income statement of a company?

General and administrative expenses

Salaries and wages expense

Income tax expense

Interest expense

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following would NOT be considered as a component of ‘cost’ of stock?

Salaries of selling staff Transportation inward costs Import duties

Purchase price

Question No: 31 ( Marks: 1 ) – Please choose one

Regardless of how long it takes to produce and sell , inventory is always considered to be a:

current liability long-term asset stockholders’ equity current asset

Question No: 32 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor? Fixed assets

Current liabilities Profit sharing ratio Long term assets

Question No: 33 ( Marks: 1 ) – Please choose one

What will the effects on financial statements, if machinery is depreciated @ 10%? It will be treated as an expense in income statement only

It will be subtracted from concerned asset only It will be treated as a current asset only

It will be treated as an expense in income statement and subtracted from concerned assets in Balance Sheet

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the Accounts receivable? Accounts receivable arises when a company buys goods or services from another party on credit

Accounts receivable is a miscellaneous category that may include loans to employees

Accounts receivable are more formal than notes receivable Accounts receivable are often called trade receivables

Question No: 35 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the partnership form of business?

Partners must have to share their profits in equal proportion Partners are personally liable for the liabilities of the business Partnerships must make their accounts available to the general public Partnership agreement in writing is called Partnership deed

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the following represents the relationship between persons who have agreed to share the profit of business carried on by all or any of them acting for all?

Sole-ownership

Private limited company Public limited company

Partnership

Question No: 37 ( Marks: 1 ) – Please choose one

When the capitals are fixed, which of the following account will be debited for drawings made by a partner?

Individual Partner s Current Account

Partner s Cash Account

Partner s Bank Account

Partners Capital Account

Question No: 38 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

Name of company

Place of registered office of company Objective of the company

All of the given options

Question No: 39 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

Share premium account

Share holder account

Debtors control account

Creditor control account

Question No: 40 ( Marks: 1 ) – Please choose one

A _______________ business is one in which income is generated by the resale of bought Products.

Manufacturing

Merchandising Sole Proprietorship Partnership

Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following documents contains rules and regulations for internal management of the company?

Memorandum of Association Articles of Association Prospectus

Statutory Declaration

Question No: 42 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if provision for Income Tax to be made Rs. 12,000 is given in adjustment?

It will be deducted in Income Statement only

It will be treated as current liability in balance sheet only It will be treated as current asset in balance sheet only

Both it will be deducted in income statement and it will be treated as current liability in balance sheet

Question No: 43 ( Marks: 1 ) – Please choose one

A firm may earn profit during an accounting period but have less money in the bank at the end of the period then it had at the beginning. Which of the followings, on its own, could explain this?

Not paying invoices received from creditors The sale of fixed assets during the period

An increase in trade debtors over the course of the period

An increase in the depreciation charge relative to the previous accounting Period doubted

Question No: 44 ( Marks: 1 ) – Please choose one Which of the given Asset is

Not

included in the calculation acid test ratio? Stock

Cash

Debtors

Bills Receivable

Question No: 45 ( Marks: 1 ) – Please choose one

When the current Ratio is 2: 5 and the amount of Current Liabilities is Rs. 25,000. What will be the amount of Current Assets?

Rs. 62,500

Rs. 12,500

Rs. 10,000 (2 * 25000/5 = 10000)

Cannot be calculated with the help of given data

Question No: 46 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.

Rs. 98,000

Rs. 1, 47,000

Rs. 2, 45,000

Rs. 3, 43,000

Question No: 47 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.

Rs. 98,000

Rs. 1, 47,000

Rs. 2, 45,000

Rs. 3, 43,000

Question No: 48 ( Marks: 1 ) – Please choose one

The net income calculated in the income statement for the accounting period is reported on:

Bank Statement

Statement of retained earnings Statement of cash flows None of the given options

Question No: 49 ( Marks: 1 ) – Please choose one

A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to:

When closing stock is given in trial balance, then it will effect: Trading account only

Balance sheet only Owner’s equity only

Both Trading account and Balance sheet

Question No: 38 ( Marks: 1 ) – Please choose one

Fixed Assets (WDV) + Working Capital =?

Total assets employed

Total liabilities

Total assets

Current assets

Question No: 39 ( Marks: 1 ) – Please choose one

Which of the following statements is

NOT TRUE about the partnership form of business?

A partnership is a business run by two or more persons A partnership business is easy to set up

Each partner is liable under the law for the actions of other partners In the absence of agreement, partners will be paid salaries

Question No: 40 ( Marks: 1 ) – Please choose one Which of the following statement is

TRUE

about the partnership form of business?

Partners must have to share their profits in equal proportion Partners are personally liable for the liabilities of the business Partnerships must make their accounts available to the general public Partnership agreement in writing is called Partnership deed Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following are the owners of a company? Proprietors

Partners Shareholders Managers

Question No: 42 ( Marks: 1 ) – Please choose one

The persons who sign articles and memorandum of the company and contribute in the initial share capital of the company are called:

Subscribers

Shareholders

Managers

Directors

Question No: 43 ( Marks: 1 ) – Please choose one

A _______________ business is one in which income is generated by the resale of bought Products.

Manufacturing

Merchandising Sole Proprietorship Partnership

Question No: 44 ( Marks: 1 ) – Please choose one

In which of the following auditor s remuneration payable is shown?

In balance sheet under the head of current liabilities only In balance sheet under the head of current assets only

In income statement under the administrative expense only

In both balance sheet under the head of current liabilities and income statement under the administrative expense

Question No: 45 ( Marks: 1 ) – Please choose one

Which of the following document(s) define the relation of company with outside world?

Prospectus Statutory Declaration

Memorandum of Association Articles of Association

Question No: 46 ( Marks: 1 ) – Please choose one

Which of the following is the most important document of the company? Memorandum of Association

Articles of Association Prospectus

Annual Report

Question No: 47 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if Rs. 6,000 transfer to general reserve is given in adjustment?

It will be treated in Income Statement only

It will be treated as current liability in balance sheet only

It will be treated in profit and loss appropriation account only

it will be treated in both profit and loss appropriation account and in the balance sheet

Question No: 48 ( Marks: 1 ) – Please choose one

Which of the following ratio tells about How a company would repays its loans Mark up cover ratio

Acid test ratio Current ratio Debt Equity ratio

Question No: 49 ( Marks: 1 ) – Please choose one

If company has distributable profit of Rs. 490,000, Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively. What will be the share of profit for Mr. A in distributable profit?

Rs. 98,000

Rs. 147,000

Rs. 245,000

Rs. 343,000

Question No: 50 ( Marks: 1 ) – Please choose one

A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to:

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.

Rs. 98,000

Rs. 1, 47,000

Rs. 2, 45,000

Rs. 3, 43,000

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following item will be credited in capital account of sole proprietor? Cash

Drawings

Debtors

Profit

Paper no 28

Solved by Chanda Rehman, Nomi chakwal ABr

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 1)

Ref No: 1195859 Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Liabilities of the members of the ________ is only limited to the capital introduce by member/s.

► Partnership

► Company

► Sole proprietorship

► None of the given options

Question No: 2 ( Marks: 1 ) – Please choose one

Term “Credit” means_______ by the business.

► Receiving of benefits

► It has no effect on business

► Providing of benefits

► It depends upon items

Question No: 3 ( Marks: 1 ) – Please choose one

What would be the affect on the components of the accounting equation, if goods are purchased on cash?

► Increase in cash and decrease in equity

► Increase in cash and increase in goods

► Increase in goods and decrease in cash

► Increase in equipment and increase in equity

Question No: 4 ( Marks: 1 ) – Please choose one

When a Liability is reduced or decreased, it is recorded on the:

► Right or debit side of the account

► Left or debit side of the account

► Left or credit side of the account

► Right or credit side of the account

Question No: 5 ( Marks: 1 ) – Please choose one

Accounts Receivable & Inventory are the examples of:

► Liquid assets

► Current assets

► Fixed assets

► Capital assets

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following is NOT an example of Current Asset?

► Bank Overdraft

► Accounts Receivable

► Notes Receivable

► Prepaid Expenses

Question No: 7 ( Marks: 1 ) – Please choose one

If the cost of sales is Rs. 60,000, sales are Rs. 90,000 and operating expenses are Rs. 25,000 during the year. What would be the Net Profit?

► Rs. 5,000

► Rs. 25,000

► Rs. 55,000

► Rs. 60,000

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following statement is NOT true about the Journal voucher?

► Financial data is picked only from Journal vouchers to Journal

► These are used to record all transaction other than cash & bank

► These are used to make corrections or adjustments to previous Receipts

► Format of Journal voucher is different from other vouchers

Question No: 9 ( Marks: 1 ) – Please choose one

Which one of the following is CORRECT about the closing stock?

► It appears in the assets side of a balance sheet

► It decreases the value of cost of goods sold

► It becomes opening stock of next year

► All of the given option

Question No: 10 ( Marks: 1 ) – Please choose one

In the cost of goods sold statement, Cost of direct material consumed + Direct labor=?

► Conversion cost

► Prime cost

► Total factory cost

► Cost of goods manufactured

Question No: 11 ( Marks: 1 ) – Please choose one

Consider the following inventory record:

Cost/Unit

Total

Date

Item

Quantity

Rs.

Rs.

Jan. 2

Beginning inventory

10

10

100

Mar. 4

Purchase

35

11

385

May 8

Purchase

40

12

480

Nov. 3

Purchase

20

13

260

De31

Merchandise available

105

1,225

85 units were sold, Use the FIFO method of inventory costing and determine the cost of goods sold.

► Rs. 1,225

► Rs. 1,015

► Rs. 965

► Rs. 992

Question No: 12 ( Marks: 1 ) – Please choose one

Consider the following:

Beginning inventory

10 units @ Rs. 10 per unit

First purchase

35 units @ Rs. 11 per unit

Second purchase

40 units @ Rs. 12 per unit

Third purchase

20 units @ Rs. 13 per unit

Eighty-five units were sold, what is the value of the ending inventory using the FIFO method of inventory costing?

► Rs.260

► Rs.232

► Rs.284

► Rs.268

Question No: 13 ( Marks: 1 ) – Please choose one

Which one of the following is NOT true about revenue expenditure?

► These are the running expenses of the business

► They improve the financial position of the business

► They reduce the profit of the concern

► They do not appear in the balance sheet

Question No: 14 ( Marks: 1 ) – Please choose one

Bank Reconciliation Statement is:

► A memorandum statement

► A ledger account

► A part of cash book

► A part of journal

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following assets are shown at written down value in balance sheet?

► Current assets

► Liquid assets

► Floating assets

► Fixed assets

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following account balance is shown on credit side of Trial Balance? (It is assumed that all account balances are shown on normal balance)

► Cash account

► Furniture account

► Vehicle account

► Capital account

Question No: 17 ( Marks: 1 ) – Please choose one

In which of the following condition(s) DEBT is regarded as BAD.

► Bankruptcy of the debtor

► Disappearance of debtor’s business

► Failure of repeated attempt to collect the debt

► All of the given options

Question No: 18 ( Marks: 1 ) – Please choose one

If Bad Debts written off are given in adjustment, then which of the following entry for bad debts written off is CORRECT?

► Bad debts a/c (Dr) and Trading a/c (Cr)

► Provision for Bad and Doubtful debts a/c (Dr) and Bad debts a/c(Cr)

► Bad debts a/c (Dr) and debtors a/c (Cr)

► Trading a/c (Dr) and Bad debts a/c (Cr)

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following is NOT based on the concept of double entry book keeping system?

► Subsidiary Ledgers doubted

► Creditors Control Accounts

► Debtors Control Accounts

► All of the given options

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following is (are) benefit/s of subsidiary ledger accounts to business?

► It tells about customer attitude of payments

► It can be checked against the control account to pick up recording errors

► It tells about the complete history of transactions of business client

► All of the given options

Question No: 21 ( Marks: 1 ) – Please choose one

When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 22 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account

► Rs. 3,600

► Rs. 4,000

► Rs. 1,600

► Rs. 2, 400

Question No: 23 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Write off Bad debts (given in adjustments)

2,400

Sundry Debtors (given in trial balance)

33,200

Provision is created on Debtors at 10% Identify the Total amount deducted from Sundry debtors.

► Rs. 460

► Rs. 2,400

► Rs. 3,080

► Rs. 5,480

Question No: 24 ( Marks: 1 ) – Please choose one

The figure of cash received from debtors can be located either from cash book or:

► Debtor’s Control Account

► Balance Sheet

► Profit & Loss Account

► Bills Payable Account

Question No: 25 ( Marks: 1 ) – Please choose one

Which of the following is a selling expense?

► Interest on deposits

► Any tax/freight is paid on purchases

► General salaries paid to laborers

► Tax & freight paid on sale

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following item will be shown on debit side of capital account of sole proprietor?

► Cash

► Drawings

► Debtors

► Profit

Question No: 27 ( Marks: 1 ) – Please choose one

Identify the selling expenses of manufacturing concern with the help of given data.

Particulars

Rs.

Salesman’s salary

70,000

Commission on sales

28,000

Carriage outward

10,000

Carriage inward

5,000

► Rs. 80,000

► Rs. 60,000

► Rs. 38,000

► Rs. 1, 08,000

Question No: 28 ( Marks: 1 ) – Please choose one

The income statement of the Limited company is also known as:

► Manufacturing account

► Profit and Loss account

► Profit and Loss Appropriation account

► Current Account

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is the most important document of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Annual Report

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following is (are) NOT example(s) of distributable profit?

► None of the given options

► General reserve

► Accumulated profit and loss (credit balance)

► Revaluation reserves

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following is a common way to evaluate a company’s performance?

► Compare this year’s performance of the company to a prior year’s performance of the company.

► Compare the company’s performance to the industry’s performance.

► Compare the company’s performance to the performance of a competing company.

► All of the given options

Question No: 32 ( Marks: 1 ) – Please choose one

Current ratio may be increased by:

► Overstating current Assets

► Overstating current Liabilities

► Understating current Assets

► Understating current assets and overstating current liabilities

Question No: 33 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.

► Rs. 98,000

► Rs. 1, 47,000

► Rs. 2, 45,000

► Rs. 3, 43,000

Question No: 34 ( Marks: 1 ) – Please choose one

Mr. B provided the following information at the end of the month:

Particulars

Rs.

Cash

100

Accounts Receivable

500

Accounts Payable

200

Bank Loans

1,000

Based on the information provided, what are the total assets of Mr. B?

► Rs.200

► Rs. 600

► Rs. 800

► Rs. 1,700

Question No: 35 ( Marks: 1 ) – Please choose one

An overdraft will appear as:

► A debit balance in both the bank statement and the cash book

► A credit balance in the bank statement but as a debit balance in the cash book

► A credit balance in the cash book but as a debit balance in the bank statement

► A credit balance in both the bank statement and the cash book

Question No: 36 ( Marks: 1 ) – Please choose one

When we close bad debt account, which of the following account is debited?

► Profit and loss account

► Bad debt account

► Debtor account

► Creditor account

Question No: 37 ( Marks: 1 ) – Please choose one

Payment is made of a company’s purchases on credit, which of the following is correct:

► Debit stock account and credit creditors account

► Debit creditors account and credit cash account

► Debit cash account and credit creditors account

► Debit stock account and credit cash account

Question No: 38 ( Marks: 1 ) – Please choose one

Suppose a firm has 200 debtors, and each of them owes exactly Rs. 150 at the start of June. What is the total amount owed by all debtors?

► Rs. 2,000

► Rs. 3,000

► Rs. 30,000

► Rs. 150,000

Question No: 39 ( Marks: 1 ) – Please choose one

The amount owed by debtors at the end of a month appears on the_________ side of the control account.

► Left side or debit

► Left side or credit

► Right side or debit

► Right side or credit

Question No: 40 ( Marks: 1 ) – Please choose one

We usually allow the customer to deduct a certain amount from the invoice value for prompt payment. In doing so we are granting a:

► Commission

► Allowance

► Discount

► Rebate

Question No: 41 ( Marks: 1 ) – Please choose one

Which of the following is decreased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 42 ( Marks: 1 ) – Please choose one

Which of the following is increased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 43 ( Marks: 1 ) – Please choose one

Accumulated depreciation is a ____________ account?

► Fixed asset

► Current asset

► Contra asset

► Liability

Question No: 44 ( Marks: 1 ) – Please choose one

Prepaid insurance will become an expense as the prepaid amount _________.

► Expires

► Adjust

► Paid

► Regulate

Question No: 45 ( Marks: 1 ) – Please choose one

Adjusting costs are reported as:

► Revenues

► Expenses

► Assets

► Net Income

Question No: 46 ( Marks: 1 ) – Please choose one

Insurance premiums paid in advance but not yet expired are reported in which of the following account?

► Insurance payable

► Prepaid insurance

► Advance payment account

► Insurance expense

Question No: 47 ( Marks: 1 ) – Please choose one

Profit and loss sharing in partnership must be based on which of the following:

► Service to the partnership

► Capital contribution

► Any profit-and-loss-sharing method partners desire

► A stated fraction

Question No: 48 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the profit share of Mr. B?

► Rs.42,350

► Rs.44,150

► Rs.41,600

► Rs.40,850

Net Profit = 85 000

Intrest on Drawings = 1500 + 1800 = 3300

Total Profit of the firm = 85 000 + 3300 = 88 300

Profit of B = 88 300 / 2 = 44150

Question No: 49 ( Marks: 1 ) – Please choose one

Which of the following is quoted company?

► Private Limited Company

► Public Limited Company

► Listed company

► Non Listed Company

Question No: 50 ( Marks: 1 ) – Please choose one

For which of the following share premium can be utilized?

► To write off preliminary expenses

► To meet the expenses of issue of shares

► To issue bonus shares

► All of the given options

Question No: 51 ( Marks: 1 ) – Please choose one

Which of the following can be utilized to meet the expenses of issue of shares?

► Reserves

► Debentures

► Share premium

► Term finance certificate

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following capital is required for the registration of the company?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 53 ( Marks: 1 ) – Please choose one

The financial statement that captures both the current operating result and the associated changes in the balance sheet is:

► Statement of retained earnings

► Statement of financial position

► Statement of cash flows

► Statement of changes in equity

Question No: 54 ( Marks: 1 ) – Please choose one

Which of the following is measured by debt ratio?

► Short-term liquidity

► Creditors’ long term risk

► Short-term risk of the company

► All of the given options

Question No: 55 ( Marks: 3 )

What do you know about the Profit and loss appropriation account in case of partnership?

Profit and loss appropriation account contains the information regarding the amount of profit distributed to the partner’s current account.

Question No: 56 ( Marks: 5 )

Show the following assets at Written Down Value in Balance Sheet with complete working.

Particulars

Rs.

Plant & Machinery

53,000

Buildings

35,000

Tools & Equipment

8,650

Depreciation Rate:

v Plant & Machinery @ 10%

v Buildings @ 5%

v Tools& Equipment @ 15%

Plant &

Buildings

Tools &

Total in

Machinery

Equipment

Rs.

Cost

53,000

35,000

8,650

96,650

Depreciation

(5,300)

(1,750)

(1,297.5)

8,347.5

W.D.V

47,700

33,250

7,352.5

88,302.5

Question No: 57 ( Marks: 5 ) Briefly discuss the followings:

1. Issuance of shares at premium

Issuance of shares for an amount more than its face value is known issuance of shares at premium.

2. Cash flow statement

Cash flow statement is a part of financial statements; it contains the information regarding the cash generated by (used in) operating, investing and financing activities.

3. Debentures

Debentures are issued by the companies to raise finance. Normally, the carry a fixed rate of return.

4. Notes to the accounts

Notes to the accounts are a part of financial statements, which contains the detail about the Company, accounting policies used, critical judgment areas and detail of certain account heads of balance sheet and profit and loss account along with the detail of contingencies and commitments, if any.

Question No: 58 ( Marks: 10 )

What is the effect of given adjustments on Trading & Profit & Loss account and Balance Sheet?

a. Accrued Expenses or Outstanding Expenses

Accrued expenses or outstanding expenses are shown as a current liability in the Balance Sheet second effect goes to the expenses in the Trading & Profit and Loss account .

Double entry:

Expenses a/c

Accrued Expenses a/c

b. Prepaid Expenses or Unexpired Expenses

Prepaid expenses are shown as a current asset in the balance sheet and second effect goes to cash and bank account in the Balance Sheet.

Double entry:

Prepaid expenses a/c

Cash and Bank a/c

c. Accrued Revenue or Revenue Receivable

Accrued revenue is shown as a current asset in the balance sheet and second effect goes to revenue account in the Trading & Profit and Loss account.

Double entry:

Accrued revenue a/c

Revenue a/c

d. Unearned Revenue or Revenue Received in Advance

Unearned revenue is shown as a current liability in the Balance Sheet corresponding effect goes to cash and bank account in the balance Sheet.

Double entry:

Cash and Bank a/c

Unearned revenue a/c

e. Depreciation of Asset

Depreciation is shown as an expense in the Trading & Profit and Loss account and the corresponding effect goes to provision of depreciation in the balance sheet.

Double entry:

Depreciation expense a/c

Provision for depreciation a/c

Question No: 59 ( Marks: 10 )

Mr. A, Mr. B and Mr. C entered into partnership on 1st January 2007 contributing Rs.15, 000, Rs.10, 000 and Rs.18, 000. Mr. A invested Rs.6, 000 as additional capital on 1st May, Mr. B brought additional capital of Rs.4, 000 on 1st October and Mr. C brought additional capital of Rs.8, 000 on 1st October. They earned a profit of Rs.10, 500 during the year. Profits are to be shared in their capital ratio. Calculate partners share of profit and pass the necessary journal entry. Financial year ends on 31st December.

Contributed on

Mr. A

Mr. B

Mr. C

Total in Rs.

January 01, 07

15,000

10,000

18,000

43,000

May 01, 07

6,000

—

—

6,000

October 01, 07

—

4,000

—

4,000

October 01, 07

—

—

8,000

8,000

21,000

14,000

26,000

61,000

Sharing percentage

34.43%

22.95%

42.62%

100%

Share of profit

3,615

2,410

4,475

10,500

Dr (Rs.)

Cr. (Rs.)

Profit for the year

10,500

Partner’s account

Mr. A

3,615

Mr. B

2,410

Mr. C

4,475

10,500

10,500

Paper no 29

Solved by Chanda Rehman, Nomi chakwal ABr

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 3)

Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Double entry accounting system includes:

► Accrual accounting only

► Cash accounting only

► Both cash and accrual accounting

► None of the given options

Question No: 2 ( Marks: 1 ) – Please choose one

What will be the effect on accounting equation, when payment is made to the creditor of the business?

► Increase in an asset, increase in owner’s equity

► Increase in an asset, increase in a liability

► Decrease in an asset, decrease in owner’s equity

► Decrease in an asset, decrease in a liability

Question No: 3 ( Marks: 1 ) – Please choose one

Which of the following is CORRECT about the flow of recording a transaction?

An informal accounting statement that lists the ledger account balances at a point in time and compares the total of debit balances with the total of credit balances is known as:

► Income Statement

► Balance Sheet

► Trial Balance

► Cash Book

Question No: 5 ( Marks: 1 ) – Please choose one

The unfavorable balance of Profit and Loss account should be:

► Added in liabilities

► Subtracted from current assets

► Subtracted from liabilities

► Subtracted from capital

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following account will be credited, if business purchased a vehicle on cash?

► Vehicle account

► Cash account

► Business account

► Bank account

Question No: 7 ( Marks: 1 ) – Please choose one

The total of all costs incurred to convert raw material into finished goods is known as:

► Prime cost

► Conversion cost

► Sunk cost

► Opportunity cost

Question No: 8 ( Marks: 1 ) – Please choose one

A decrease in value of a fixed asset due to age, wear and tear is known as:

► Depreciation

► Accumulated Depreciation

► Appreciation

► Written Down Value

Question No: 9 ( Marks: 1 ) – Please choose one

The cost of moving plant and machinery to a new site will be treated as:

► Revenue expense

► Capital expense

► Administrative expense

► Operating expense

Question No: 10 ( Marks: 1 ) – Please choose one

Depreciation arises because of:

► Fall in the market value of an asset

► Fall in the value of money

► Physical wear and tear

► All of the given options

Question No: 11 ( Marks: 1 ) – Please choose one

Which one of the following is NOT true about revaluation of fixed assets?

► Revaluation should be made after regular intervals

► Change in value should be permanent

► Only relevant asset should be revalued in the whole class of asset

► The profit or loss will be transferred to revaluation account

Question No: 12 ( Marks: 1 ) – Please choose one

A Bank Reconciliation Statement is prepared to:

► Ascertain that the difference between the Cash Book balance and the Bank Statement balance has been accounted for

► Correct errors in the Cash Book or errors in the Bank Statement

► Amend the balance of the Bank Statement of the firm

► Amend the balance in the Cash Book of the firm

Question No: 13 ( Marks: 1 ) – Please choose one

Bank Statement is a record of transactions between the bank and the holder of:

► A foreign currency account

► A current account

► A saving account

► All of the given options

Question No: 14 ( Marks: 1 ) – Please choose one

Which one of the following transactions will cause the balance in Mr. Terry’s Cash Book to be greater than his Bank Statement balance?

► A cheque is drawn but not yet presented at the bank for payment

► The bank has not yet notified to Mr. Terry about a dishonoured cheque

► A credit transfer into Terry’s Bank Account

► A cheque payment of Rs.101 is recorded in the Cash Book as Rs.110

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following option is TRUE about the characteristic(s) of Bad Debt?

► It is a definite loss to the business

► It is not shown in Balance Sheet

► No provision is necessary for it

► All of the given options

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following account will be debited, when the bad debts are recovered?

► Bad debt recovered a/c

► Cash a/c

► Doubtful debts a/c

► Bad debts a/c

Question No: 17 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

6,000

Current year’s provision (new)

1,500

► Rs. (5,100)

► Rs. 5,100

► Rs. (900)

► Rs. 900

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

► A’s account (Dr.) and B’s account (Cr.)

► B’s account (Dr.) and A’s account (Cr.)

► Sales account (Dr.) and B’s account (cr.)

► B’s account (Dr.) and Sales account (Cr.)

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 20 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,600

► Rs. 2,000

► Rs. 2,600

Question No: 21 ( Marks: 1 ) – Please choose one

Which one of the following is TRUE about provisions?

► It is necessary to prepare for showing true picture of balance sheet

► It is a reduction from assets

► It is prepared for specific purposes

► All of the given options

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following is/are TRUE about the sole trader form of business?

► Sole traders do not need to consult accountants

► Sole traders must register the name of their business with the Registrar of Companies

► All of the given options

► A sole trader is liable to pay income tax on his/her earnings

Question No: 23 ( Marks: 1 ) – Please choose one

Which of the following is TRUE about the treatment of insurance paid in advance Rs. 13,000?

► It will be treated as an other income in Profit & Loss Account

► It will be treated as a current asset in Balance Sheet

► It will be treated as a current liability in Balance Sheet

► It will be treated as an accrued expense in Balance Sheet

Question No: 24 ( Marks: 1 ) – Please choose one

Rent receivable (given in trial balance) is an item of_____________.

► Balance Sheet

► Profit & Loss Account

► Trading Account

► Both Balance Sheet and Profit & Loss Account

Question No: 25 ( Marks: 1 ) – Please choose one

What will the effects on financial statements, if machinery is depreciated @ 10%?

► It will be treated as an expense in income statement only

► It will be subtracted from concerned asset only

► It will be treated as a current asset only

► It will be treated as an expense in income statement and subtracted from concerned assets in Balance Sheet

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is TRUE about a merchandising company?

► A merchandising company’s business is to buy and sell products

► A merchandising company must use the perpetual system to account for merchandising inventory

► A merchandising company’s business is to provide services

► A Sugar Mill is an example of a merchandising company

Question No: 27 ( Marks: 1 ) – Please choose one

Identify the selling expenses of manufacturing concern with the help of given data.

Particulars

Rs.

Salesman’s salary

70,000

Commission on sales

28,000

Carriage outward

10,000

Carriage inward

5,000

► Rs. 80,000

► Rs. 60,000

► Rs. 38,000

► Rs. 1, 08,000

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following statements is NOT TRUE about the partnership form of business?

► A partnership is a business run by two or more persons

► A partnership business is easy to set up

► Each partner is liable under the law for the actions of other partners

► In the absence of agreement, partners will be paid salaries

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when interest on capital is charged against the distribution of profit?

► Interest account

► Partner’s capital account

► Profit and Loss account

► Profit and loss appropriation account

Question No: 30 ( Marks: 1 ) – Please choose one

When preparing a cash flow statement, which of the following would be classified as a financing activity?

≡ A new long-term loan taken out to finance the purchase of fixed

assets

≡ Salaries paid

≡ Interest paid on a long-term bank loan

≡ The cost of purchasing a patent

Question No: 31 ( Marks: 1 ) – Please choose one

When preparing cash flow statements, the repayments of a loan during the year should be included under which of the following heading?

► Operating activities doubted

► Financing activities

► Investing activities

► None of the given options

Question No: 32 ( Marks: 1 ) – Please choose one

An example of financing activities in the context of cash flow statement is:

► Capital expenditures on purchase of fixed assets

► Long-term deposit

► Financial charges paid

► Dividend paid no idea

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following business publishes the Financial Statements?

► Sole-Proprietorship

► Partnership

► Trust

► Public Limited Company

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the given Asset is Not included in the calculation acid test ratio?

► Stock

► Cash

► Debtors

► Bills Receivable

Question No: 35 ( Marks: 1 ) – Please choose one

Which of the following ratio tells about “How a company would repays its loans”

► Mark up cover ratio not sure ► Acid test ratio

► Current ratio

► Debt Equity ratio

Question No: 36 ( Marks: 1 ) – Please choose one

Rs.

Gross profit

50,000

Operating profit

42,000

Sales

250, 000

What is the amount of operating expenses

?

► Rs. 8,000

► Rs. 92,000

► Rs. 62,500

► Rs. 300,000

Question No: 37 ( Marks: 1 ) – Please choose one

Debenture is also named as:

► Share

► Bond

► Equity

► Reserve

Question No: 38 ( Marks: 1 ) – Please choose one

What is the treatment of Accumulated Depreciation in Balance Sheet?

► It may treated as a deficit

► It may treated as a surplus

► It may treated as a revenue

► None of the given options not sure

Question No: 39 ( Marks: 1 ) – Please choose one

An accounting system is used by a business to:

► Analyze transactions

► Handle routine book-keeping tasks

► Classify and summarize financial information

► All of the given options

Question No: 40 ( Marks: 1 ) – Please choose one

Which one of the following vouchers is used to record the non-cash transactions?

► Journal Vouchers

► Receipt Vouchers

► Payment Vouchers

► Nominal Vouchers

Question No: 41 ( Marks: 1 ) – Please choose one

What would be the value of ‘cost of goods manufactured’ if the total factory cost of the month is Rs. 6,000, opening work in process is Rs. 2,000 and the closing work in process is Rs. 2,500?

► Rs. 5,500

► Rs. 8,000

► Rs. 4,500

► Rs. 8,500

Question No: 42 ( Marks: 1 ) – Please choose one

Particulars

Rs.

Direct materials costs

80,000

Direct labor costs

50,000

Manufacturing overhead costs

60,000

Prime cost

?

► Rs.130, 000

► Rs.110, 000

► Rs.140, 000

► Rs.190, 000

Question No: 43 ( Marks: 1 ) – Please choose one

When we close bad debts account, which of the following account is credited?

► Profit and loss account

► Bad debt account

► Debtor account

► Provision for bad debt account

Question No: 44 ( Marks: 1 ) – Please choose one

Which of the following statement is correct? If a company fails to record estimated bad debts expense,

► Net realizable value is understated

► Expenses are understated

► Revenues are understated

► Receivables are understated

Question No: 45 ( Marks: 1 ) – Please choose one

In a partnership of Mr. A and Mr. B, the share of profit of Mr. A is Rs.75,375 and the share of profit of Mr. B is Rs. 25,125. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 3:1

Question No: 46 ( Marks: 1 ) – Please choose one

Which of the following is the major benefit of a partnership over a sole proprietorship?

► Unlimited liability

► Single tax filing

► Difficult ownership resale

► Raising capital

Question No: 47 ( Marks: 1 ) – Please choose one

Which of the following is used to convert accounting information from the cash basis of accounting to the accrual basis of accounting?

► Ledger

► Journal entries

► Adjusted entries

► Trial balance

Question No: 48 ( Marks: 1 ) – Please choose one

Unexpired costs are reported as:

► Revenues

► Expenses

► Assets

► Income

Question No: 49 ( Marks: 1 ) – Please choose one

The weekly or biweekly compensation received by hourly-paid employees is called:

► Salary

► Wages

► Income

► Profit

Question No: 50 ( Marks: 1 ) – Please choose one

Income tax expense of Eden Corporation shows a debit balance of Rs.7,000 in its unadjusted trial balance and Rs.7,600 in adjusted trial balance. Which of the following account will be debited in adjusting entry?

► Income tax payable

► Prepaid income tax

► Income tax expense

► Income tax paid

Question No: 51 ( Marks: 1 ) – Please choose one

Which of the following capital is offered to the general public?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following capital is taken up by the general public?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 53 ( Marks: 1 ) – Please choose one

With reference to the statement of cash flows the transactions involving production and delivering goods or providing services must be classified as:

► Business activities

► Operating activities

► Financing activities

► Investing activities

Question No: 54 ( Marks: 1 ) – Please choose one

According to the statement of cash flows following are the examples of investing activities except:

► Sales of machinery

► Capital invested by the owners

► Purchase of building for the business use

► Cash received from the disposal of equipment

Question No: 55 ( Marks: 3 )

How bad debts & provision for doubtful debts (new and old) are treated in profit and loss account.

Question No: 56 ( Marks: 5 )

Differentiate the following terms and also mention how these are treated in financial Statements.

v Carriage inwards and carriage outwards

v Returns inwards and returns outwards

Question No: 57 ( Marks: 5 )

Following information is extracted from the books of Abrar Ltd as on December 31st, 2007.

Particulars

Rs

Carriage inwards

8,000

Legal charges

6,500

Financial charges

223,500

Tax payable

30,000

Advances from customer

10,000

General reserve

40,000

Accumulated profit brought forward(credit balance )

95,000

Long term loans

100,000

Additional information

The authorized capital is Rs. 5,000,000 divided into 500,000 shares of Rs. 10 each. Issued and paid up capital 2500,000.

You are required to calculate Share holders equity

Question No: 58 ( Marks: 10 )

Write down the at least ten distinguishing features of a limited company which differentiate it from sole proprietor business

Question No: 59 ( Marks: 10 )

The following is the trial balance of Sikander’s Photo Studio, Inc., dated December 31, 2007. The net income for the period is Rs.36,000. You are required to prepare Balance Sheet as on December 31, 2007.

Sikander’s Photo Studio, Inc. Trial balance

December 31, 2007

Cash

Rs.171,100

Accounts receivable

9,400

Prepaid studio rent

3,000

Unexpired insurance

7,200

Supplies

500

Equipment

18,000

Accumulated depreciation: equipment

Rs.7,200

Notes payable

10,000

Accounts payable

3,200

Salaries payable

4,000

Income tax payable

6,000

Unearned revenue

8,800

Capital stock

100,000

Retained earnings

34,000

Revenue earned

165,000

Salary expense

85,000

Supply expense

3,900

Rent expense

12,000

Insurance expense

1,900

Advertising expense

500

Depreciation expense: equipment

1,800

Interest expense

900

Income taxes expense

23,000

338,200

338,200

Paper no 30

Solved by Chanda Rehman, Nomi chakwal, ABr

FINALTERM EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 4)

Ref No: 1195706 Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Word “Credit” is derived from ______ language.

► Latin

► English

► French

► Chinese

Question No: 2 ( Marks: 1 ) – Please choose one

What is the nature of an expense account?

► Debit

► Credit

► Revenue

► None of the given options

Question No: 3 ( Marks: 1 ) – Please choose one

A summarized record of transactions related to individuals or things is called a/an

___________.

► Account

► Voucher

► Journal

► Trial balance

Question No: 4 ( Marks: 1 ) – Please choose one

In an account, if credit side < debit side then the balance is known as:

► Negative Balance

► Debit Balance

► Positive Balance

► Credit Balance

Question No: 5 ( Marks: 1 ) – Please choose one

Which of the following organizations do NOT prepare Income & Expenditure account?

► Public limited companies

► Private limited companies

► Partnership firms

► All of the given options

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following account will be credited in the books of XYZ Co. Ltd, if the business purchased a vehicle though cheque?

► Vehicle account

► Cash account

► Business account

► Bank account

Question No: 7 ( Marks: 1 ) – Please choose one

If the cost of sales is Rs. 60,000, sales are Rs. 90,000 and operating expenses are Rs. 25,000 during the year. What would be the Net Profit?

► Rs. 5,000

► Rs. 25,000

► Rs. 55,000

► Rs. 60,000

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following financial statement DO NOT show the financial health of a business at a specific date?

► Profit and loss account

► Balance sheet

► Statement of financial position

► All of the given options

Question No: 9 ( Marks: 1 ) – Please choose one

The total of all costs incurred to convert raw material into finished goods is known as:

► Prime cost

► Conversion cost

► Sunk cost

► Opportunity cost

Question No: 10 ( Marks: 1 ) – Please choose one

Which of the following particular is NOT included in the specimen of a Journal Voucher?

► Name of organization

► Bank receipt

► Debit amount

► Credit amount

Question No: 11 ( Marks: 1 ) – Please choose one

Accountancy covers which of the following area(s):

► Book-keeping

► Accounting

► Auditing

► All of the given options

Question No: 12 ( Marks: 1 ) – Please choose one

Depreciation arises because of:

► Fall in the market value of an asset

► Fall in the value of money

► Physical wear and tear

► All of the given options

Question No: 13 ( Marks: 1 ) – Please choose one

Which of the following account will be debited, when the bad debts are recovered?

► Bad debt recovered a/c

► Cash a/c

► Doubtful debts a/c

► Bad debts a/c

Question No: 14 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

800

► Rs. 400

► Rs. 800

► Rs. 2,000

► Rs. 2,400

Question No: 15 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

6,000

Current year’s provision (new)

1,500

► Rs. (5,100)

► Rs. 5,100

► Rs. (900)

► Rs. 900

Question No: 16 ( Marks: 1 ) – Please choose one

On which of the following system control accounts are based?

► Double entry book keeping system

► Single entry book keeping system

► Cash accounting system

► All of the given options

Question No: 17 ( Marks: 1 ) – Please choose one

Which of the following entry will be passed to record discount received in control account?

► Discount Received (Dr) and Creditors Control A/c (Cr)

► Discount Received (Dr) and Creditors A/c (Cr)

► Creditors Control A/c (Dr) and Discount Received (Cr)

► Creditors A/c (Dr) and Discount Received (Cr)

Question No: 18 ( Marks: 1 ) – Please choose one

A receipt of cash Rs. 10,000 from Mr. Bilal is recorded as Rs. 1,000. What amount will be adjusted in rectifying entry?

► Rs. 1,000

► Rs. 9,000

► Rs. 10,000

► Rs. 11,000

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

► A’s account (Dr.) and B’s account (Cr.)

► B’s account (Dr.) and A’s account (Cr.)

► Sales account (Dr.) and B’s account (cr.)

► B’s account (Dr.) and Sales account (Cr.)

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of Sale to Mr.”A” Rs. 336 was not recorded at all?

► Only sales account

► Only A’s account

► Only cash account

► Both sales account and A’s account

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?

► Bank charges

► An error on the Bank Statement

► An uncredited deposit

► An unpresented cheque

Question No: 22

( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be deducted from

Sundry Debtors in Balance Sheet.

Particulars

Rs.

Bad debts (from trial balance)

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,000

► Rs. 2,000

► Rs. 2,600

Question No: 23

( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Bad Debts (Given in trial balance)

500

Old provisions (Given in trial balance)

700

Sundry Debtors (Given in trial balance)

44,800

If the Provision for doubtful debts has been increased by 5%, which amount of new provision will be shown in Profit & Loss Account?

► Rs. 2,240

► Rs. 2,425

► Rs. 1,925

► Rs. 3,025

Question No: 24 ( Marks: 1 ) – Please choose one

The main objective of financial reporting is to provide:

► Essential information to internal users of financial reports.

► Useful economic information about the business to the external parties for sound financial decisions.

► Information to internal users about the cash position of the business.

► Information to the Securities Exchange Commission (SEC).

Question No: 25 ( Marks: 1 ) – Please choose one

A financial statement that indicates the success or failure of a business, over a period of time is called:

► A cash flow statement

► A retained earnings statement

► An income statement

► A balance sheet

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor?

► Fixed assets

► Current liabilities

► Profit sharing ratio

► Long term assets

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the Accounts receivable?

► Accounts receivable arises when a company buys goods or services from another party on credit

► Accounts receivable is a miscellaneous category that may include loans to employees

► Accounts receivable are more formal than notes receivable

► Accounts receivable are often called trade receivables

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following account will be debited when the interest on drawings is charged?

► Partner’s capital account

► Interest account

► Partner’s current account

► Profit & Loss account

Question No: 29 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

► Name of company

► Place of registered office of company

► Objective of the company

► All of the given options

Question No: 31 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

► Share premium account

► Share holder account

► Debtors control account

► Creditor control account

Question No: 32 ( Marks: 1 ) – Please choose one

What are the effects on financial statements, if provision for Income Tax to be made Rs. 12,000 is given in adjustment?

► It will be deducted in Income Statement only

► It will be treated as current liability in balance sheet only

► It will be treated as current asset in balance sheet only

► Both it will be deducted in income statement and it will be treated as current liability in balance sheet

Question No: 33 ( Marks: 1 ) – Please choose one

Which of the following is NOT a cash inflow?

► Sale of fixed asset

► Issue of debentures

► Cash from business operation

► Purchase of fixed asset

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the following statement in NOT TRUE about the limited company form of business?

► The limited company form of business allows ownership of the business to be spread amongst many people

► Shareholders can appoint professionals

► Shareholders are personally liable for all the liabilities incurred by the business

► Regular filing of information about the affairs of the company is a legal requirement

Question No: 35 ( Marks: 1 ) – Please choose one

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.

► Rs. 98,000

► Rs. 1, 47,000

► Rs. 2, 45,000

► Rs. 3, 43,000

Question No: 36 ( Marks: 1 ) – Please choose one

What is the treatment of Accumulated Depreciation in Balance Sheet?

► It may treated as a deficit

► It may treated as a surplus

► It may treated as a revenue

► None of the given options doubted

Question No: 37 ( Marks: 1 ) – Please choose one

According to the double entry system of book keeping, the investment of Rs.10, 000 in the business made by the owner will effect:

► Cash Account & Capital Account

► Cash Account & Expense Account

► Capital Account & Revenue Account

► Capital Account & Expense Account

Question No: 38 ( Marks: 1 ) – Please choose one

The return of goods by a customer should be debited to:

► Customer’s account

► Sales return account

► Goods account

► Accounts receivable account

Question No: 39 ( Marks: 1 ) – Please choose one

Expenditures incurred annually on renewal of patent are known as:

► Revenue Expenditures

► Capital Expenditures

► Deferred Expenditures doubted

► None of the given options

Question No: 40 ( Marks: 1 ) – Please choose one

Debts that are not collectible and worthless to the creditor are known as:

► Doubtful debts

► Bad debts

► Provision for doubtful debts

► Loss

Question No: 41 ( Marks: 1 ) – Please choose one

ABC Company received discount on its credit purchases, which of the following will be debited while entering in journal?

► Cash

► Discount received

► Creditors

► Bank

Question No: 42 ( Marks: 1 ) – Please choose one

The amount owed by debtors at the start of a month appears on the ___________ side of the individual debtors account.

► Left side or credit

► Left side or debit

► Right side or debit

► Right side or credit

Question No: 43 ( Marks: 1 ) – Please choose one

Ahmad Industries want to make payment to its supplier in the form of a pay order. The bank deducted Rs.160 as service charges without its knowledge. The error is known as:

► Error of commission

► Error of omission

► Error of original entry

► Error of principle

Question No: 44 ( Marks: 1 ) – Please choose one

Which of the following accounts would never be reported in the income statement as an expense?

► Depreciation expense

► Income tax expense

► Interest expense

► Dividends expense

Question No: 45 ( Marks: 1 ) – Please choose one

In the heading of financial statement, ___________ is not required?

► Title of financial statement

► Name of the person who prepares financial statement

► Period for which financial statement is prepared

► Name of business entity

Question No: 46 ( Marks: 1 ) – Please choose one

In a partnership of Mr. A and Mr. B, the share of profit of Mr. A is Rs.75,375 and the share of profit of Mr. B is Rs. 25,125. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 3:1

Question No: 47 ( Marks: 1 ) – Please choose one

Which of the following is decreased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 48 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal investment and equal share in profit or loss. Markup on capital of Mr. A is Rs.2,500 and markup on drawings of Mr. B is Rs.2,800. The net income for the year is Rs.95,000. What will be the amount of distributable profit?

► Rs.89,700

► Rs.94,700

► Rs.95,300

► Rs.100,300

Question No: 49 ( Marks: 1 ) – Please choose one

How many members can subscribe their names in memorandum of association for registration of public limited company?

► 2

► 3

► 5

► 7

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following is responsible to register the companies?

► State Bank of Pakistan

► Security and Exchange Commission of Pakistan

► Supreme Court

► Stock Exchange

Question No: 51 ( Marks: 1 ) – Please choose one

The amount of share premium can be utilized except:

► To write off preliminary expenses

► To meet the expenses of issue of shares

► To distribute among the share holders

► To issue bonus shares

Question No: 52 ( Marks: 1 ) – Please choose one

Which of the following capital is required for the registration of the company?

► Issued capital

► Subscribed capital

► Authorized capital

► Reserve capital

Question No: 53 ( Marks: 1 ) – Please choose one

Which of the following items of balance sheet are useful in evaluating a company’s liquidity?

► Current assets and other assets

► Current liabilities and current assets

► Current liabilities and plant and equipment

► Non current liabilities and other assets

Question No: 54 ( Marks: 1 ) – Please choose one

The company ABC purchased an asset for Rs. 40,000, paying 30,000 in cash and issuing a long term note payable for remaining balance. The amount will be recorded in statement of cash flows as:

► Rs. 40,000 cash outflow as investing activity

► Rs. 30,000 cash outflow as investing activity doubted

► Rs. 10,000 cash inflow as investing activity

► Rs. 70,000 cash inflow as investing activity

Question No: 55 ( Marks: 3 )

Why an organization is needed to prepare a cash flow statement.

Question No: 56 ( Marks: 5 )

Show the following assets at Written Down Value in Balance Sheet with complete working.

Particulars

Rs.

Plant & Machinery

53,000

Buildings

35,000

Tools & Equipment

8,650

Depreciation Rate:

v Plant & Machinery @ 10%

v Buildings @ 5%

v Tools& Equipment @ 15%

Question No: 57 ( Marks: 5 )

Financial year decided by partnership agreement is 1st July to 30th June. Mr. Ali is partner and having a capital of Rs. 1,500,000 on July 1st 2007 and he introduced more capital on August 1st 2007 Rs. 10,000 on April 1st 2008, Rs.500,000 and on June 1st 2008 , Rs. 5,000. Mark up rate is 10% p.a.

Calculate mark up on Mr. Ali’s capital for the year ending on 30th June 2008.

Question No: 58 ( Marks: 10 )

The following errors have been discovered in the book of a Business Concern:

Wage of Rs. 500 paid for the installation of plant debited to Wages Account.

Purchases of Office Equipment Rs. 2,000 were recorded as regular purchases of business.

Credit sale of Rs. 600 to Kareem was wrongly debited to Kamran.

Rs. 200 drawn by the proprietor was treated as Trade Expenses.

Rs. 300 received as a Commission was wrongly credited to Sales Account.

Required:

Pass the rectifying entries only.

Question No: 59 ( Marks: 10 )

Prepare Balance Sheet for the manufacturing concern as on 31st December, 2007 with the help of given data.

When the Bank Statement balance is more than the Cash Book balance, it is because of:

► Unpresented cheques

► Unrecorded bank charges

► Uncredited cheques

► None of the given options

Question No: 18 ( Marks: 1 ) – Please choose one

Upon checking the Bank Statement against the Cash Book by Mr. A, It was discovered that an amount of Rs.120 for dividend from XYZ Co. had not been entered in the Cash Book. Which of the following entry should be recorded to rectify the mistake?

► Bank Account(Dr.) and Dividend Account (Cr.)

► XYZ Co. Account (Dr.) and Bank Account (Cr.)

► Dividend Account (Dr.) and Bank Account (Cr.)

► Bank Account (Dr.) and XYZ Co. Account (Cr.)

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following subsidiary book(s) is (are) maintained for debtors control account?

► Sales Day Book

► Sales Return

► Debtors Ledger

► All of the given options

Question No: 20 ( Marks: 1 ) – Please choose one

Which of the following is shown on credit side of creditors control account?

► Bills Receivable

► Return inwards

► Credit purchases

► Discount allowed

Question No: 21 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of carriage charges, paid for a new plant purchased mistakenly debited to carriage account?

► Plant account

► Carriage account

► Both plant account and carriage account

► Trading account

Question No: 22 ( Marks: 1 ) – Please choose one

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

If the Provision for doubtful debts has been increased by 5%, which amount of new provision will be shown in Profit & Loss Account?

► Rs. 2,240

► Rs. 2,425

► Rs. 1,925

► Rs. 3,025

Question No: 24 ( Marks: 1 ) – Please choose one

An asset which is NOT easily convertible to cash or not expected to become cash within a period of twelve months is called:

► Liquid asset

► Current asset

► Fixed asset

► Floating asset

Question No: 25 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 26 ( Marks: 1 ) – Please choose one

Which of the following is CORRECT if depreciation is given in trial balance?

► All of the given options are correct

► It means depreciation has already been deducted from concerned asset account

► It will be shown as an expense in income statement only

► It will not be deducted from concerned asset in Balance Sheet

Question No: 27 ( Marks: 1 ) – Please choose one

Identify the selling expenses of manufacturing concern with the help of given data.

Particulars

Rs.

Salesman’s salary

70,000

Commission on sales

28,000

Carriage outward

10,000

Carriage inward

5,000

► Rs. 80,000

► Rs. 60,000

► Rs. 38,000

► Rs. 1, 08,000

Question No: 28 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

► Name of company

► Place of registered office of company

► Objective of the company

► All of the given options

Question No: 30 ( Marks: 1 ) – Please choose one

In Income Statement, both beginning inventory and ending inventory appear in the section of:

► Cost of good sold

► Indirect cost

► Selling cost

► Factory over head cost

Question No: 31 ( Marks: 1 ) – Please choose one

In which of the following auditor’s remuneration payable is shown?

► In balance sheet under the head of current liabilities only

► In balance sheet under the head of current assets only

► In income statement under the administrative expense only

► In both balance sheet under the head of current liabilities and income statement under the administrative expense

Question No: 32 ( Marks: 1 ) – Please choose one

How dividend declared is treated in the Balance Sheet of the company?

► Provision

► Current liability

► Reserves and surplus

► Current assets

Question No: 33 ( Marks: 1 ) – Please choose one

The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable and an ending balance of Rs. 15,000. Credit Sales of Rs. 200,000 were made during the year. Using this information, compute cash collected from customers.

► Rs. 205,000

► Rs. 215,000

► Rs. 195,000

► Rs. 200,000

Question No: 34 ( Marks: 1 ) – Please choose one

Which of the following statement in NOT TRUE about the limited company form of business?

► The limited company form of business allows ownership of the business to be spread amongst many people

► Shareholders can appoint professionals

► Shareholders are personally liable for all the liabilities incurred by the business

► Regular filing of information about the affairs of the company is a legal requirement

Question No: 35 ( Marks: 1 ) – Please choose one

In calculating earning per share (EPS), the net profit is divided by which of the following?

► Number of ordinary shares

► Number of preference shares

► Paid up capital

► Authorized capital

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the given Asset is Not included in the calculation acid test ratio?

► Stock

► Cash

► Debtors

► Bills Receivable

Question No: 37 ( Marks: 1 ) – Please choose one

Particulars

Rs.

Debentures

1, 50, 000

Equity Capital

2, 00,000

General Reserve

90, 000

Accumulated profit

60,000

What is debt equity ratio

?

► 15: 20 (or 3:4)

► 15:24 (or 5: 8)

► 15:29

► 15:35 (or 3: 7)

Question No: 38 ( Marks: 1 ) – Please choose one

Normally the practice of Book Keeping under Single Entry System is followed by:

► Small businesses only

► Governments only

► Large scale businesses only

► Both small businesses and governments

Question No: 39 ( Marks: 1 ) – Please choose one

In which of the following case the bank cannot refuse the payment?

► Stale cheque

► Bearer cheque

► Insolvency of the customer

► Post dated cheque

Question No: 40 ( Marks: 1 ) – Please choose one

Stock account is debited and creditors account is credited, which of the following is reflecting the statement?

► Discount received

► Goods returned

► Purchase of goods on credit

► Payment of goods

Question No: 41 ( Marks: 1 ) – Please choose one

Payment is made of a company’s purchases on credit, which of the following is correct:

► Debit stock account and credit creditors account

► Debit creditors account and credit cash account

► Debit cash account and credit creditors account

► Debit stock account and credit cash account

Question No: 42 ( Marks: 1 ) – Please choose one

We usually allow the customer to deduct a certain amount from the invoice value for prompt payment. In doing so we are granting a:

► Commission

► Allowance

► Discount

► Rebate

Question No: 43 ( Marks: 1 ) – Please choose one

What will be obtained from the Purchases Returns Book?

► Discount received

► Returns outward

► Credit purchases

► Discount allowed

Question No: 44 ( Marks: 1 ) – Please choose one

Deferred cost is classified as:

► Current liability

► Current asset

► Non-current asset

► Non-current liability

Question No: 45 ( Marks: 1 ) – Please choose one

Which of the following is increased when an asset is converted into expense in adjustment?

► Revenue

► Net income

► Expense

► Liability

Question No: 46 ( Marks: 1 ) – Please choose one

Accumulated depreciation is a ____________ account?

► Fixed asset

► Current asset

► Contra asset

► Liability

Question No: 47 ( Marks: 1 ) – Please choose one

Failure to record ___________ will result in understates net income.

► Accrued expenses

► Expenses incurred

► Accrued revenues

► Accounts payable

Question No: 48 ( Marks: 1 ) – Please choose one

Puget Sound Co. sold marketable securities Costing Rs.80,000 for Rs.92,000 cash. In the company’s income statement and statement of cash flows, respectively, this will appear as:

► A Rs.12,000 gain and a Rs.92,000 cash receipt

► A Rs.92,000 gain and a Rs.8,000 cash receipt

► A Rs.12,000 gain and a Rs.80,000 cash receipt

► A Rs.92,000 sale and a Rs.92,000 cash receipt

Question No: 49 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the amount of distributable profit?

► Rs.81,700

► Rs.88,300

► Rs.131,700

► Rs.146,700

Question No: 50 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership with an equal investment and equal share in profit or loss. Markup on capital of Mr. A is Rs.2,000 and markup on drawings of Mr. B is Rs.3,000. The net income for the year is Rs.50,000. What will be the profit share of Mr. A?

► Rs.22,500

► Rs.25,500

► Rs.27,500

► Rs.55,000

Question No: 51 ( Marks: 1 ) – Please choose one

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an equal share in profit or loss. Markup on capital of Mr. A is Rs.2,000 and markup on drawings of Mr. B is Rs.3,000. The net income for the year is Rs.85,000. What will be the profit share of Mr. B?

► Rs.40,000

► Rs.43,000

► Rs.130,000

► Rs.133,000

Net Profit = 85 000

Add Intrest on Drawings = 3000 Less intrest on capital = 2000

Total Profit of the firm = 85 000 + 3000 – 2000 = 86 000

Profit of B = 86000 / 2 = 43000

Question No: 52 ( Marks: 1 ) – Please choose one

The value of a share as quoted on the stock exchange is known as:

► Book value

► Par value

► Market value

► Face value

Question No: 53 ( Marks: 1 ) – Please choose one

Which of the following is not a measure of short-term liquidity?

► Current ratio

► Quick ratio

► Acid-test ratio

► Debt ratio

Question No: 54 ( Marks: 1 ) – Please choose one

Short term investments in marketable securities and treasury bills that will mature within ninety days from the date of acquisition, must be classified as:

► Receivables

► Receipts from Capital

► Current and intangible assets

► Cash equivalents

Question No: 55 ( Marks: 3 )

Show how the following items will appear in profit and loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

8,500

Provision for doubtful debts (new)

1,500

Question No: 56 ( Marks: 5 )

What is the Purpose of Control Accounts?

Question No: 57 ( Marks: 5 )

Umer and Usman, both of whom are CPAs, form a partnership, with Umer investing Rs.100,000 and Usman, Rs.80,000. They agree to share net income as follows:

Any partnership earnings in excess of the amount required to cover the interest and salary allowances to be divided 60 percent to Umer and 40 percent to Usman.

The partnership net income for the first year of operations amounted to Rs.247,000 before interest and salary allowances. Show how this amount should be divided between the two partners.

Question No: 58 ( Marks: 10 )

Following information are extracted from the books of XY and Sons for the year 2007.

Particulars

Rs.

Fixed Asset at WDV

529,500

Material 31-12-2007

188,000

Work in process on 31-12-2007

178,000

Finished Goods on 31-12-2007

198,000

Debtors

160,000

Bank

7,000

Creditors

100,000

Expenses payable

15,000

Profit for the year

X:90,000

Y:80,000

Drawings for the year

X:10,000

Y:15,000

Capital

X:400,000

Y: 350,000

Current Account

X: 13,000

Y:10,000

Long term loans

2,27,500

You are required to prepare Balance Sheet as on 31st December 2007. Show complete working.

Question No: 59 ( Marks: 10 )

Prepare Bank Reconciliation Statement as on 31st March 2009 with the help of given data.

Particulars

Rs.

1

Balance as per Cash Book (Dr.)

180,000

2

Cheques paid into Bank in March 2009 but credited by the bank in April 2009

7,900

4,500

1,300

3

Cheques issued in March 2009 but cashed in April 2009

11,000

5,800

4

Cheques entered in the Cash Book in March 2009 but paid into bank in April 2009

1,000

5

Interest allowed by the bank

2,500

6

Interest charged by the bank

500

Paper no 32

Solved by Chanda Rehman, Nomi chakwal ABrFINALTERM

EXAMINATION

Fall 2009

MGT101- Financial Accounting (Session – 4)

Ref No: 1195876 Time: 120 min Marks: 87

Question No: 1 ( Marks: 1 ) – Please choose one

Shares for which amount is paid by public are called ________ shares.

► Paid up

► Authorized

► Bonus shares

► All are correct options

Question No: 2 ( Marks: 1 ) – Please choose one

If a business purchases machinery for Rs. 30,000 on 31st January 2008 having life of 10 years, this expense will be realized ___________ under the concept of accrual accounting.

► For the year 2008 only

► For the last day of 10th year only

► Over 10 years

► Nothing can be said about it

Question No: 3 ( Marks: 1 ) – Please choose one

What is the nature of an expense account?

► Debit

► Credit

► Revenue

► None of the given options

Question No: 4 ( Marks: 1 ) – Please choose one

A summarized record of transactions related to individuals or things is called a/an

___________.

► Account

► Voucher

► Journal

► Trial balance

Question No: 5 ( Marks: 1 ) – Please choose one

Which one of the following is NOT prepared by Non profit organizations?

► Profit & Loss account

► Income & Expenditure account

► Receipts & Payments account

► Balance Sheet

Question No: 6 ( Marks: 1 ) – Please choose one

Which of the following organizations prepare Income & Expenditure account?

► Public libraries

► NGOs

► Labor unions

► All of the given options

Question No: 7 ( Marks: 1 ) – Please choose one

The favorable balance of Profit and Loss account should be:

► Added in liabilities

► Subtracted from current assets

► Subtracted from liabilities

► Added in capital

Question No: 8 ( Marks: 1 ) – Please choose one

Which of the following entry will be recorded in the books of accounts for the goods returned to Mr. ‘A’?

► Purchases return account (Dr) and Trading account (Cr)

► Mr.” A”/ creditor account (Dr) and purchases return account (Cr)

► Purchases return account (Dr) and Mr.” A” / creditor account (Cr)

► Mr.” A”/ creditor account (Dr) and Profit & Loss account (Cr)

Question No: 9 ( Marks: 1 ) – Please choose one

Which of the following account will be credited, if business bought goods on credit from Mr. Ali?

► Purchases account

► Mr. Ali account

► Cash account

► Sales account

Question No: 10 ( Marks: 1 ) – Please choose one

If the cost of sales is Rs.1,00,000, sales are Rs. 300,000 and operating expenses Rs. 200,000 during the year. What would be the Gross Profit?

► Rs. 5,000

► Rs. 1, 00,000

► Rs.1, 05,000

► Rs. 2, 00,000

Question No: 11 ( Marks: 1 ) – Please choose one

Partially completed products that are not yet ready for sale are known as:

► Raw material

► Work in process

► Finished goods

► Closing stock

Question No: 12 ( Marks: 1 ) – Please choose one

In the cost of goods sold statement, Cost of direct material consumed + Direct labor=?

► Conversion cost

► Prime cost

► Total factory cost

► Cost of goods manufactured

Question No: 13 ( Marks: 1 ) – Please choose one

The Primary objective of providing depreciation is:

► To calculate true profit

► To show the asset on market value

► To reduce tax Burdon

► To provide funds for replacement

Question No: 14 ( Marks: 1 ) – Please choose one

Under the reducing balance method of depreciation:

► Amount of depreciation increases every year

► Amount of depreciation remains constant for every year

► Amount of depreciation decreases every year

► None of the given options

Question No: 15 ( Marks: 1 ) – Please choose one

Particulars

Rs.

Opening written down value of machine

1,00,000

Cost of new machine purchased during the year

50,000

Depreciation during the year

21,000

Closing written down value (WDV)

?

► Rs. 1, 29,000

► Rs. 1, 50,000

► Rs. 1, 21,000

► Rs. 71,000

Question No: 16 ( Marks: 1 ) – Please choose one

In which of the following condition(s) DEBT is regarded as BAD.

► Bankruptcy of the debtor

► Disappearance of debtor’s business

► Failure of repeated attempt to collect the debt

► All of the given options

Question No: 17 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

3,600

Provision for doubtful debts (old)

6,000

Current year’s provision (new)

1,500

► Rs. (5,100)

► Rs. 5,100

► Rs. (900)

► Rs. 900

Question No: 18 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Write off Bad debts (given in adjustments)

2,400

Sundry Debtors (given in trial balance)

33,200

Provision is created on Debtors at 5%

Requirement: Identify the Total amount which will deduct from Sundry debtors.

► Rs. 460

► Rs. 2,400

► Rs. 1,540

► Rs. 3,940

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of carriage charges, paid for a new plant purchased mistakenly debited to carriage account?

► Plant account

► Carriage account

► Both plant account and carriage account

► Trading account

Question No: 20 ( Marks: 1 ) – Please choose one

_____ are committed in those cases where proper distinction between revenue and capital items is not made.

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 21 ( Marks: 1 ) – Please choose one

A receipt of cash Rs. 10,000 from Mr. Bilal is recorded as Rs. 1,000. What amount will be adjusted in rectifying entry?

► Rs. 1,000

► Rs. 9,000

► Rs. 10,000

► Rs. 11,000

Question No: 22 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be shown in profit & loss account.

Particulars

Rs.

Bad debts

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,600

► Rs. 2,000

► Rs. 2,600

Question No: 23 ( Marks: 1 ) – Please choose one

The main objective of financial reporting is to provide:

► Essential information to internal users of financial reports.

► Useful economic information about the business to the external parties for sound financial decisions.

► Information to internal users about the cash position of the business.

► Information to the Securities Exchange Commission (SEC).

Question No: 24 ( Marks: 1 ) – Please choose one

Which of the following journal entry will be recorded, if cash is drawn by a Proprietor?

► Proprietor’s drawings a/c (Dr.) and Cash a/c (Cr.)

► Cash a/c (Dr.) and Proprietor’s drawings a/c (Cr.)

► Proprietor’s Capital (Dr.) and Proprietor’s drawings a/c (Cr.)

► Proprietor’s drawings (Dr.) and Proprietor’s Capital a/c (Cr.)

Question No: 25 ( Marks: 1 ) – Please choose one

Which of the following item will be shown on debit side of capital account of sole proprietor?

► Cash

► Drawings

► Debtors

► Profit

Question No: 26 ( Marks: 1 ) – Please choose one

When closing stock is given in trial balance, then it will effect:

► Trading account only

► Balance sheet only

► Owner’s equity only

► Both Trading account and Balance sheet

Question No: 27 ( Marks: 1 ) – Please choose one

Fixed Assets (WDV) + Working Capital =?

► Total assets employed

► Total liabilities

► Total assets

► Current assets

Question No: 28 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when interest on capital is charged against the distribution of profit?

► Interest account

► Partner’s capital account

► Profit and Loss account

► Profit and loss appropriation account

Question No: 29 ( Marks: 1 ) – Please choose one

Which of the following is(are) type(s) of capital account in partnership?

≡ Fixed Capital

≡ Current Capital

≡ Fluctuating Capital

≡ Both Fixed Capital and Fluctuating Capital

Question No: 30 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following is (are) type(s) of Public Limited Companies?

► Listed company

► Non listed company

► Private limited company

► Both Listed Company and non listed company

Question No: 32 ( Marks: 1 ) – Please choose one

Which of the following clause/s are discussed in Memorandum of Association of Companies?

► Name of company

► Place of registered office of company

► Objective of the company

► All of the given options

Question No: 33 ( Marks: 1 ) – Please choose one

The amount received; in excess of the face value of the shares is transferred to which of the following?

► Share capital account

► Right share

► Share premium account

► Share holder account

Question No: 34 ( Marks: 1 ) – Please choose one

Preliminary Expenses of the company may write off against:

► Share premium account

► Share holder account

► Debtors control account

► Creditor control account

Question No: 35 ( Marks: 1 ) – Please choose one

Which of the following account will be debited if shares issued against cash?

► Share premium account

► Cash account

► Share capital account

► Profit and loss account

Question No: 36 ( Marks: 1 ) – Please choose one

Which of the following is the most important document of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Annual Report

Question No: 37 ( Marks: 1 ) – Please choose one

Which of the following documents contains rules and regulations for internal management of the company?

► Memorandum of Association

► Articles of Association

► Prospectus

► Statutory Declaration

Question No: 38 ( Marks: 1 ) – Please choose one

How dividend declared is treated in the Balance Sheet of the company?

► Provision

► Current liability think this one

► Reserves and surplus

► Current assets

Question No: 39 ( Marks: 1 ) – Please choose one

The primary purpose of preparing a cash flow statement for an entity is to provide information about:

► Its financial position at the end of an accounting period

► Its cash receipts and cash payments during an accounting period

► Its financial position at the start of an accounting period

► None of the given options

Question No: 40 ( Marks: 1 ) – Please choose one

In cash flow statements, which of the following would appear as an inflow of cash?

► The repayments of a bank loan

► Dividend issue in the current year

► Money received as result of selling fixed assets

► The difference between the valuations of old and new fixed assets doubted

Question No: 41 ( Marks: 1 ) – Please choose one

Debenture is also named as:

► Share

► Bond

► Equity

► Reserve

Question No: 42 ( Marks: 1 ) – Please choose one

Prepaid interest given in the Trial Balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 43 ( Marks: 1 ) – Please choose one

Wages outstanding given in the trial balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 44 ( Marks: 1 ) – Please choose one

Which of the following fixed asset is normally appreciated with the passage of time?

► Land

► Vehicles

► Furniture

► Machinery

Question No: 45 ( Marks: 1 ) – Please choose one

Expenditures incurred annually on renewal of patent are known as:

► Revenue Expenditures

► Capital Expenditures doubted

► Deferred Expenditures

► None of the given options

Question No: 46 ( Marks: 1 ) – Please choose one

Accounts receivables are shown in balance sheet at:

► Net realizable value

► Total collectible amount

► Current value

► Collected amount

Question No: 47 ( Marks: 1 ) – Please choose one

Stock account is credited and creditors account is debited, which of the following is reflecting the statement?

► Discount received

► Goods returned

► Purchase of goods on credit

► Payment of goods

Question No: 48 ( Marks: 1 ) – Please choose one

Mr. Ali’s bank book shows a debit balance of Rs. 36,000. He deposited a cheque of Rs.15,000 but not yet collected by the bank. What will be the balance of bank statement?

► Rs. 21,000

► Rs. 51,000

► Rs. 36,000

► Rs. 15,000

Question No: 49 ( Marks: 1 ) – Please choose one

We usually allow the customer to deduct a certain amount from the invoice value for prompt payment. In doing so we are granting a:

► Commission

► Allowance

► Discount

► Rebate

Question No: 50 ( Marks: 1 ) – Please choose one

Which of the following is NOT a financial statement?

► Balance sheet

► Audit report

► Income statement

► Cash flow statement

Question No: 51 ( Marks: 1 ) – Please choose one

In a partnership of Mr. X and Mr. Y, the share of profit of Mr. X is Rs.3,840 and the share of profit of Mr. Y is Rs. 5,760. What will be the ratio of their share?

► 1:2

► 2:3

► 3:2

► 2:1

Question No: 52 ( Marks: 1 ) – Please choose one

Interest expenses of Epler Corporation shows a debit balance of Rs.200 in its unadjusted trial balance and Rs.250 in adjusted trial balance. Which of the following account will be debited in adjusting entry?

► Interest expense

► Interest payable

► Prepaid interest

► Interest paid

Question No: 53 ( Marks: 1 ) – Please choose one

The amount of share premium can be utilized except:

► To write off preliminary expenses

► To meet the expenses of issue of shares

► To distribute among the share holders

► To issue bonus shares

Question No: 54 ( Marks: 1 ) – Please choose one

Which of the following ratio cannot be computed for a period in which the company incurs a net loss?

► Acid-test ratio doubted

► Return on investment

► Price-earning ratio

► None of the given options

Question No: 55 ( Marks: 3 )

What are the benefits of subsidiary ledgers?

Answer:

When business expands the number of accounts and entries are also increased so to control the accounts in a better way subsidiary ledgers are used which give a good picture and vision of the account study and accountablility.

Following are the subsidiary ledgers used:

Sales Journals

Sales Returns

Debtors Ledgers

Question No: 56 ( Marks: 5 )

What is bank overdraft? Mention an example for this. Why companies have to pay mark up on it. Under which head mark up paid on overdraft is shown in financial statement.

Answer:

Bank Overdraft is the form of loan taken from the bank when the amount is exceeding from specific limit, and bank deduct this overdraft amount when company’s account debited, As this is the type of Loan and so company have to pay mark up as interest on the overdraft amount and depend upon the terms of agreement. In the financial statement the mark up is shown in Financial Expenses.

Question No: 57 ( Marks: 5 )

What will be the effects of given adjustments on the income statement and balance sheet?

Income statement

Balance sheet

Adjustment

Revenue

Expense

Net income

Assets

Liabilities

Owner’s

equity

Converting assets to

No effect

Increase

Decrease

Decrease

No effect

Decrease

expenses

Converting liabilities to

Increase

No Effect

NO Effect

No effect

Decrease

No effect

revenue

Accruing unpaid

No effect

Decrease

No effect

No effect

Decrease

expenses

Accruing uncollected

Increase

No effect

increase

No effect

No effect

revenue

Note: For better understanding an example is given above. Follow the format given inexample.

Question No: 58 ( Marks: 10 )

Prepare Debtors and Creditors control account from the following data. Also work out their closing balances on June 30, 2009

June 1:

Rs.

Opening balance of Debtors

58,500

Opening balance of Creditors

70,000

Details of June:

Total credit sales

44,700

Cheques and cash received

55,000

Purchase return

6,600

Total credit purchases

48,000

Discount received

2,200

Discount allowed

2,800

Cheques and cash paid

36,330

Creditors Control Account

Debit Side

Credit Side

Date

No.

Narration

Dr. Rs

Date

No.

Narration

Cr. Rs

Purchase Return

6,600

B/F

70,000

Discount

Received

2,200

Purchase

48,000

Cash/cheques

Paid

36,330

C/f

72,870

Total

1,18000

Total

118000

Debtors Control Account

Debit Side

Credit Side

Date

No.

Narration

Dr. Rs

Date

No.

Narration

Cr. Rs

B/f

58,500

Cash/Checque Rec

55,000

Total Sale

44,700

Discount

28,00

C/f

45,400

Total

10,3200

Total

10,3200

Question No: 59 ( Marks: 10 )

From the given information as at June 30, 2007, calculate fixed assets at WDV and cost of goods sold as on June 30,2008.

Building at Cost

239,500

Equipment at Cost

22,000

Vehicles at Cost

45,000

Accumulated Dep. – Building

12,250

Equipment

7,000

Vehicles

13,900

Stock Opening Balance

58,725

Sales

247,500

Purchases

136,775

Carriage

Inward

6,050

Vehicle Running

Expenses

22,300

Additional Information:

Closing stock Rs. 70,050.

Depreciation during the year o Building 6,000

o Vehicles Rs 8,500 o Equipment 4,000

Solution:

Cost of Goods Sold:

Opening Stock Balance

58,725

Add: Purchase

136,775

Add: Carriage Inward

6,050

Less: Closing Stock

(70,050)

Cost of Goods sold

131,500 Rs.

Fixed Assets:

Building (12,250)

227,250

Vehicle (13,900)

31,100

Equipment (7,000)

15,000

Total

273,350 Rs.

Paper no 33

Solved by Chanda Rehman, & ABr

Question No: 1 ( Marks: 1 ) – Please choose one

Prepaid interest given in the Trial Balance will be treated as a (an):

► Asset

► Liability

► Revenue

► Deferred expense

Question No: 2 ( Marks: 1 ) – Please choose one

The net income calculated in the income statement for the accounting period is reported on:

► Bank Statement

► Statement of retained earnings

► Statement of cash flows

► None of the given options

Question No: 3 ( Marks: 1 ) – Please choose one

If the Capitals of partners are fixed then, at the end of financial year a partner’s drawings are transferred to the:

► Credit side of the partner’s capital account

► Credit side of the partner’s current account

► Debit side of partnership bank account

► Debit side of the partner’s current account

Question No: 4 ( Marks: 1 ) – Please choose one

If one partner receives a salary which is credited to him at the end of the year, the share of profit available for distribution will be:

► Increased

► Decreased

► Unchanged

► Changed and become negative

Question No: 5 ( Marks: 1 ) – Please choose one

In which situation(s) Partnership is dissolved?

► In case of death of partner

► At the admission of new partner

► If any partner resigned from partnership

► All of the given options

Question No: 6 ( Marks: 1 ) – Please choose one

Rs.

Gross profit

50,000

Operating profit

42,000

Sales

250, 000

What is the amount of operating expenses

?

► Rs. 8,000

► Rs. 92,000

► Rs. 62,500

► Rs. 300,000

Question No: 7 ( Marks: 1 ) – Please choose one

Current ratio may be increased by:

► Overstating current Assets

► Overstating current Liabilities

► Understating current Assets

► Understating current assets and overstating current liabilities

Question No: 8 ( Marks: 1 ) – Please choose one

In which of the following interim dividend is treated?

► In profit and Loss account

► In profit and Loss appropriation account

► On the asset side of the Balance Sheet

► In trading account

Question No: 9 ( Marks: 1 ) – Please choose one

The statement of changes in equity basically shows the movement of:

► share capital during the year

► Capital reserves during the year

► Revenue Reserves during the year

► All of the given options not sure

Question No: 10 ( Marks: 1 ) – Please choose one

Which of the following can offer its share to general public at large?

► A private limited company

► A listed company

► A partnership firm

► A trust

Question No: 11 ( Marks: 1 ) – Please choose one

The Joint Stock Company is formed under the Companies Ordinance:

► 1984

► I884

► 1948

► 1965

Question No: 12 ( Marks: 1 ) – Please choose one

In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.

► Fixed Capital Account

► Current Account

► Fluctuating Capital Account

► Floating Capital Account

Question No: 13 ( Marks: 1 ) – Please choose one

Which of the following account will be debited when the interest on drawings is charged?

► Partner’s capital account correct

► Interest account

► Partner’s current account

► Profit & Loss account

Question No: 14 ( Marks: 1 ) – Please choose one

Which of the following account will be credited when interest on capital is charged against the distribution of profit?

► Interest account

► Partner’s capital account

► Profit and Loss account

► Profit and loss appropriation account

Question No: 15 ( Marks: 1 ) – Please choose one

Which of the following statement is TRUE about the partnership form of business?

► Partners must have to share their profits in equal proportion

► Partners are personally liable for the liabilities of the business

► Partnerships must make their accounts available to the general

public

► Partnership agreement in writing is called Partnership deed

Question No: 16 ( Marks: 1 ) – Please choose one

Which of the following statements is NOT TRUE about the partnership form of business?

► A partnership is a business run by two or more persons

► A partnership business is easy to set up

► Each partner is liable under the law for the actions of other partners

► In the absence of agreement, partners will be paid salaries

Question No: 17 ( Marks: 1 ) – Please choose one

Which of the following is TRUE about the treatment of insurance paid in advance Rs. 13,000?

► It will be treated as an other income in Profit & Loss Account

► It will be treated as a current asset in Balance Sheet

► It will be treated as a current liability in Balance Sheet

► It will be treated as an accrued expense in Balance Sheet

Question No: 18 ( Marks: 1 ) – Please choose one

Which of the following is/are NOT shown in balance sheet of sole proprietor?

► Fixed assets

► Current liabilities

► Profit sharing ratio

► Long term assets

Question No: 19 ( Marks: 1 ) – Please choose one

Which of the following appears in both the Income Statement debit column and the Balance Sheet credit?

Which of the following is the first phase of the typical operating cycle?

► Receive cash from customers

► Pay cash to suppliers

► Sell goods and services to customers

► Purchase goods and services

Question No: 24 ( Marks: 1 ) – Please choose one

Following information are extracted from books of Mr. XYZ

Particulars

Rs.

Closing value of stock

40,000

Write off Bad debts (given in adjustments)

2,400

Sundry Debtors (given in trial balance)

33,200

Provision is created on Debtors at 10%

Identify the Total amount deducted from Sundry debtors.

► Rs. 460

► Rs. 2,400

► Rs. 3,080 ( wrong)

► Rs. 5,480 ( correct)

Question No: 25 ( Marks: 1 ) – Please choose one

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account

► Rs. 3,600

► Rs. 4,000

► Rs. 1,600

► Rs. 2, 400

Question No: 26 ( Marks: 1 ) – Please choose one

Consider the following data and identify the amount which will be deducted from Sundry Debtors in Balance Sheet.

Particulars

Rs.

Bad debts (from trial balance)

1,600

Provision for doubtful debts (old)

2,000

Current year’s provision (new)

1,000

► Rs. 600

► Rs. 1,000

► Rs. 2,000

► Rs. 2,600

Question No: 27 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of a purchase return of Rs.200 to Mr. “A” entered in sales book instead of purchase return book?

► A’s account only

► Sales account only

► Purchase returns account and sales account

► Purchases account only

Question No: 28 ( Marks: 1 ) – Please choose one

“Goods sold to Mr. Salman for Rs. 6,000 have been forgotten to enter in books of accounts”, is an example of:

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 29 ( Marks: 1 ) – Please choose one

_____ are committed in those cases where proper distinction between revenue and capital items is not made.

► Error of principle

► Error of omission

► Error of commission

► Error of original entry

Question No: 30 ( Marks: 1 ) – Please choose one

Which of the following account(s) will be affected, while rectifying the error of carriage charges, paid for a new plant purchased mistakenly debited to carriage account?

► Plant account

► Carriage account

► Both plant account and carriage account

► Trading account

Question No: 31 ( Marks: 1 ) – Please choose one

Which of the following entry will be passed to record discount received in control account?

► Discount Received (Dr) and Creditors Control A/c (Cr)

► Discount Received (Dr) and Creditors A/c (Cr)

► Creditors Control A/c (Dr) and Discount Received (Cr)

► Creditors A/c (Dr) and Discount Received (Cr)

Question No: 32 ( Marks: 1 ) – Please choose one

Which of the following is shown on credit side of creditors control account?

► Bills Receivable

► Return inwards

► Credit purchases

► Discount allowed

Question No: 33 ( Marks: 1 ) – Please choose one

It is supposed that on 31-12-2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 5 % of the sundry debtors are doubtful. What entry will pass to transfer the bad debts to provision for doubtful debts?